Baoding Tianwei Group Co. and three of its business units are filing for bankruptcy, five months after the maker of electrical transformers became the first state-owned Chinese company to default on an onshore bond.
Tianwei and its units are insolvent and cannot pay their debts, the company said in a statement posted on Chinamoney.com.cn, a website of the China Foreign Exchange Trade System. Tianwei said it plans to meet its backers to discuss the bankruptcy.
"Due to the global economic slowdown since 2011, the overcapacity in new energy and falling prices, the Tianwei group and some of its subsidiaries’ new energy enterprises gradually fell into more critical financial and operational crisis," Tianwei said in the statement.
Tianwei drew global attention in April when it failed to pay 85.5 million yuan ($13.8 million) of bond interest and didn’t get a government bailout. Another state-owned enterprise, China National Erzhong Group Co., is likely to be the second to default, after a local court in China said it plans to accept a restructuring request from one of Erzhong’s creditors.
Tianwei, a unit of government-owned China South Industries Group Corp., suffered huge losses in 2014, a reflection of broader struggles in the solar and wind industries. Along with electrical equipment, the company produces solar materials such as polysilicon.
China has had three domestic bond defaults this year, after the first ever in 2014. Baoding Tianwei Group reported an operating loss of 1.14 billion yuan in 2014, mainly related to new energy activities.
— With assistance by Alexandra Ho