Chaori Says Bondholder Seeks to Force Restructuring

Shanghai Chaori Solar Energy Science & Technology Co., the first Chinese company to default on corporate bonds onshore, said a bondholder is seeking to force it into bankruptcy restructuring.

The manufacturer received a letter on April 3 from Shanghai Yihua Metal Materials Ltd. saying the creditor had submitted a petition to Shanghai No. 1 Intermediate People’s Court, according a filing by Chaori to the Shenzhen Stock Exchange yesterday. Chaori said it doesn’t know whether the court will accept the case and whether the restructuring will proceed.

The solar-cell maker paid only 4 million yuan ($644,000) of an 89.8 million yuan coupon payment due on March 7 on its 2017 bonds, the company said in a statement yesterday. The partial payment signals China’s government may back off its previous practice of bailing out companies after promising to give markets a decisive role in the allocation of resources.

That said, Xuzhou Zhongsen Tonghao New Board Co., a building-materials maker that would have been the second onshore defaulter, will avoid missing payments after its guarantor said it would step in to help, the China Securities Regulatory Commission said yesterday.

Chaori has undergone a “complete loss of credibility, so it may not be able to guarantee its plan to repay debt,” according to a statement yesterday. Chaori shareholder Ni Kailu failed to secure deals with several parties to improve the company’s liquidity, Chaori said.

Trading in Chaori’s shares, which was halted Feb. 19, will resume on April 8, according to a statement yesterday. Trading may stop again if the court accepts Yihua’s application or if audited 2013 earnings show a net loss, Chaori said. The company, which had two consecutive years of net losses, is scheduled to publish audited accounts on April 28.

Chaori said its shares may be delisted if the restructuring fails should the court accepts the bankruptcy application.

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Joshua Fellman, Ben Livesey

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