Creditors of the firm responsible for China’s first domestic bond default have approved a restructuring plan in the hope of getting their money back, in an effective bailout seven months after the landmark event.
Shanghai-based Chaori Solar Energy Science & Technology Co (超日太陽能) in March defaulted on interest payments of 89.8 million yuan (US$14.7 million) on a five-year corporate bond issued in 2012.
Under the restructuring scheme, a consortium led by a unit of Hong Kong-headquartered energy group Golden Concord Holdings Ltd (協鑫集團控股) will provide 1.46 billion yuan to repay Chaori’s debts in return for shares, according to regulatory filings.
Government-backed China Great Wall Asset Management Corp (中國長城資產管理) and investment company Shanghai Jiuyang Investment Management Center (上海久陽投資管理) will also provide an 880 million yuan financial “guarantee” to allow holders of Chaori’s bonds to be compensated, the filings showed.
Creditors said that a majority approved the restructuring plan at a meeting on Thursday.
“So hard to get the money that should be ours,” one said.
At the time Chaori failed to make the payment, analysts said modern China’s first ever onshore corporate bond default could benefit the market in the long term by raising awareness of risk and making investors more selective, but the bailout shows the dangers of moral hazard in China, where the government fears the social impact of allowing companies to collapse.
Only creditors with claims of up to 200,000 yuan will be fully compensated, filings showed, with debts above the threshold being paid at 20 percent.
Shanghai television showed some creditors clapping at the meeting after the result was announced.
Chaori’s bond was delisted, while its shares were suspended, both from the Shenzhen Stock Exchange, in May after the company recorded three consecutive years of losses.
Jiangsu Golden Concord (江蘇協鑫) — the Chinese investment platform of Golden Concord — will become the controlling shareholder of Chaori, taking charge of its operations, pledging to bring the company back to profit this year and relist next year.
In little more than a year, four Chinese solar companies have sought bankruptcy or been forced to restructure their debt.
Besides Chaori, Suntech Power Holdings Co (尚德太陽能), once the world’s largest solar-panel maker, and Zhejiang Topoint Photovoltaic Co (浙江尖山光電) both filed under Chapter 15 this year, while LDK Solar Co (賽維太陽能) on Tuesday filed for bankruptcy in the US to help carry out restructuring already under way in Hong Kong and the Cayman Islands.
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