United States investment bank Goldman Sachs has come under fire from creditor banks for its handling of insolvent Guangdong Enterprises (Holdings) (GDE). The firm was engaged by Guangdong provincial government to advise on the restructuring of its Hong Kong window company. Creditor banks yesterday complained to Hong Kong Monetary Authority (HKMA) deputy chief executive David Carse, saying Goldman Sachs had blocked their lines of communication with GDE. Goldman Sachs spokesman Peter Rose said: 'Until we have completed an investigation and are ready to make a complete report, there is no purpose in making interim comments.' GDE group has been struggling under US$2.94 billion in debts and is seeking a standstill agreement with banks to stop repayments of loan principal until April. The banks said Goldman's move was not conducive to drawing up a restructuring proposal acceptable to them. Creditor banks expressed dismay to the HKMA on four key issues, including a possible cut in principal repayments and a possible delay in its restructuring timetable. They were also unhappy that the Guangdong provincial government would receive security from GDE for injecting money into the firm, taking priority over creditors. The controversy followed criticism from Goldman Sachs' competitors over its role in four recent deals, including the failed listing this month of H-share candidate Shandong International Power Development. Creditor banks felt they had been kept in the dark about the restructuring work. They also said Guangdong owned GDE and should provide unconditional support while not taking security from GDE in return for US$20 million in trade facilities. Creditors had asked for a support letter from the provincial government to maintain the stability of 84 creditor banks but the request was denied. They had also stated firmly that there should be no 'haircut', or reduction in loan principal repayments. 'If there is any haircut, many banks will sue,' a banker said. 'Not only because the GDE case would set an example for other mainland corporates but also because it would mean heavy losses for banks.' While Goldman Sachs denied there would be a 50 per cent cut in principal repayments, it said it was too early to ascertain the cash flow from the assets to be injected into GDE. On March 1, Goldman Sachs is expected to present an updated financial report on GDE prepared by accounting firm KPMG, and an outline of the proposed asset injections. However, it is not yet known when a detailed restructuring plan would be ready. A source said it was common practice worldwide for a new lender to an insolvent firm to take security to protect it from bankers pulling the plug.