Chaori Solar Energy gets debt guarantee from mainland 'bad bank'

Shanghai Chaori Solar Energy Science & Technology, the first company to default in the mainland's onshore bond market, got a guarantee to help make repayments from a state-backed fund that buys bad debt.

China Great Wall Asset Management, one of the four so-called "bad banks" that the central government set up in 1999, would guarantee as much as 788 million yuan (HK$995 million) on the solar-panel maker's 1 billion yuan of defaulted notes, it said in a statement posted on the Shenzhen Stock Exchange website on Tuesday. Shanghai Jiu Yang Investment Management Centre, one of the nine investors to restructure Chaori, would provide 92 million yuan, it said in a separate filing.

Shanghai marked a corporate bankruptcy milestone in June when a court accepted a reorganisation application for Chaori. The company paid 4 million yuan of an 89.8 million yuan coupon due in March on the 2017 bonds, and must repay the securities in full within six months of any court approval of the restructuring plan.

"The plan means investors can get all the money back," said Beijing lawyer Lei Haiqiang, who bought 2,160 Chaori bonds for around 77 yuan apiece on March 1. "I'm quite happy with the plan, and am sure it will be approved by bondholders."

With interest included, Chaori bonds were valued at about 111.64 yuan apiece, Chaori said in a statement.failed to interest on bonds due on 07 March in the country's first-ever domestic bond default

Chaori would first repay 3.06 yuan on each note from a reserve drawn from collateral. The 108.58 yuan gap would be treated as "common debt", for which the company would repay 100 per cent for portions below 200,000 yuan and only 20 per cent for holdings above 200,000 yuan, it said. The shortfall would be covered by the guarantees.