Former Rich Lister Shi Zhengrong in hot water as $690 million fake bonds claim threatens Suntech

Suntech, the company run by Australian solar power former billionaire Shi Zhengrong, has been under pressure for years now, but an investor call this week unveiled what may be the company’s biggest problem yet.

German bonds used as collateral to provide $US690 million in loans may have never existed.

Shi told investors the bonds had allowed the company to invest in a solar project in Europe – but they may have been fabricated.

“This has the highest level of attention from the company and the board,” he said. “We are vigorously pursuing all avenues to resolve this matter.”

It’s such a serious matter experts suggest it could even lead to a possible delisting, or open up avenues for investor lawsuits.

The company’s shares fell another 5.93% yesterday to just 95 cents. In the past six months, the company has lost 72% of its value, hitting a peak in 2008 at $US90.

Earlier this week, immediately after the call, shares dropped 20%.

Suntech is saying it will investigate whether GSF Capital lied about contributing $US690 million in German bonds as collateral in order to secure financing for new projects. It said it learned about the alleged fraud when it tried to sell an 80% stake in the Global Solar Fund.

But it may be too late – analysts are already abandoning the company. According to data compiled by Bloomberg, 18 analysts out of 28 rank Suntech as a “sell”.

Chairman Shi Zhengrong said the business is considering a possible credit facility in China. The local government of the city of Wuxi in China is supporting the company as long as it can provide significant employment.

Forbes has estimated Zhengrong’s wealth has plummeted 90%, after reaching $US2.9 billion back in 2008.

Zhengrong studied at the University of New South Wales, and holds a dual Chinese-Australian citizenship. He founded the China-based Suntech in 2000 with $US6 million in funding from the China government.

But the company has had a tough road. Although the Chinese solar panel market is the world’s largest, excess supplies have significantly devalued panels.

The United States’ Commerce Department has also imposed tariffs on Chinese solar panels.

While analysts don’t believe the Wuxi government will let the company go under, there is every possibility it will allow more consolidation in order to arrest the fall in prices.

Suntech’s latest annual report filed in April said it is working via “a significant working capital deficit”. By the end of 2011, that deficit was $523 million.

This article first appeared at SmartCompany.

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