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Suntech Tops Slump on Restructuring Woes: China Overnight

Suntech Power Holdings U.S. Manufacturing Facility
Suntech, the solar-panel maker whose China unit entered bankruptcy in March, filed for a provisional liquidation in Cayman Islands this week and asked for protection in the U.S. Photographer: Photographer: Ken James/Bloomberg

Chinese stocks retreated in New York this week as Suntech Power Holdings Co. plunged to a six-month low on concern the solar company will fail to pay back overseas bondholders.

The Bloomberg China-US Index of the most traded Chinese stocks in the U.S. added 1.1 percent to 100.88 yesterday, paring a loss this week to 2.1 percent. Suntech extended its weekly slump to 60 percent, the biggest on record. Xinyuan Real Estate Co. retreated 6.6 percent to trim its gain for the year to 79 percent, while real-estate information website SouFun Holdings Ltd. jumped as T.H. Capital LLC recommended buying the shares.

Suntech, the solar-panel maker whose China unit entered bankruptcy in March, filed for a provisional liquidation in Cayman Islands this week and asked for protection in the U.S. The company said its restructuring involves a debt-for-equity swap and the entry of a strategic investor. Changzhou-based Shunfeng Photovoltaic International Ltd. said in a Nov. 1 filing it agreed to buy Suntech’s main unit for $492 million. The company said it had about $1.8 billion in debt on Aug. 14.

“It seems more and more likely that the proceeds of the sale of Suntech’s Chinese assets will go to Chinese debt holders, while the assets are not worth the debt owed,” Jenny Chase, head of solar analysis at researcher Bloomberg New Energy Finance, said by e-mail. “The bankruptcy of the Cayman Islands unit reduces the chances that overseas investors will be able to make a meaningful claim on the company’s Chinese assets.”

Solar Default

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., sank 2.6 percent this week to $36.84 in New York. The Standard & Poor’s 500 Index climbed 0.5 percent to 1,770.61 in a fifth week of gains, as a better-than-forecast jobs report added to signs growth is strong enough for the economy to withstand a stimulus reduction.

Suntech’s American depositary receipts plunged 39 percent yesterday to 53 cents, extending its drop into the fifth consecutive week. The slump has taken its loss this year to 65 percent, after dropping 31 percent in 2012.

Suntech was the world’s biggest solar panel maker when it defaulted on a $541 million equity-linked bond in March. That forced the Wuxi Suntech unit into bankruptcy proceedings in China. Holders of those bonds asked the U.S. Bankruptcy Court in the Southern District of New York to push Suntech into Chapter 7 proceedings, and the company said in papers filed Nov. 6 the bankruptcy petition against it in the U.S. could derail its restructuring efforts.

Buy Recommendation

SouFun, which owns the biggest real-estate information website in China, surged 11 percent to $57.19, the biggest jump in two months.

T.H. Capital lifted its recommendation on SouFun’s ADRs to buy from hold in a note yesterday after the company reported better-than-estimated profit for the third quarter. Citigroup Inc. raised its price estimate for Soufun by 12 percent to $80.3 in a note yesterday, reiterating a buy recommendation.

The Hang Seng China Enterprises Index in Hong Kong, dropped 2.7 percent this week to 10,390.73, while the Shanghai Composite Index slumped 2 percent to a two-month low of 2,106.13.

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