SHANGHAI Chaori Solar Energy Science & Technology Co., which earlier this year became the first Chinese company to default on its domestic corporate bonds, yesterday unveiled a restructuring plan asking creditors to agree to haircuts as deep as 80 percent.

    Only 3.06 yuan (US$0.5) of collateral remains for the Shenzhen-listed solar panel maker’s notes that were issued at 100 yuan face value, according to a company statement posted to the Shenzhen Stock Exchange website.

    With interest included, those securities are worth about 111.64 yuan a piece. The 108.58 yuan gap will be treated as “common debt,” for which the company will repay 100 percent for portions below 200,000 yuan and only 20 percent for holdings above 200,000 yuan, it said.

    The haircut is part of the company’s broader reorganization plan that investors have been watching for clues on how China will balance steps to liberalize its financial industry with efforts to maintain market stability. While the nation has avoided any more note defaults since Chaori, concern has mounted that nonpayments may spread. Corporate debt topped that of the United States last year to reach US$14.2 trillion, Standard & Poor’s estimates.

    In an equity dilution plan, Chaori will issue 19.9 new shares for every 10 existing shares, according to the statement. A consortium of nine new investors, led by Jiangsu Golden Concord, the mainland arm of Hong Kong-based Golden Concord Holdings Ltd., will provide 1.46 billion yuan to Chaori to repay debt, in turn for 1.68 billion shares from existing shareholders, or 66.6 percent in the new equity structure, according to the statement, which is dated Sept. 30.

    The plan will become effective upon agreement from creditors and the local court ruling. If the plan fails, Chaori will be liquidated, it said. In that scenario, Chaori’s existing assets can cover, at maximum, only 3.95 percent of its outstanding “common debt,” which includes most parts of debt owed to bondholders, according to the statement.

    Under the business reorganization plan, Jiangsu Golden Concord will take over the management. It pledged to make a net profit for this year and to be relisted in 2015.

    Golden Concord is China’s largest power producer that isn’t State owned and is the world’s largest maker of photovoltaic material. (SD-Agencies)