Suntech Power Holdings Co, one of the world's biggest makers of panels that help convert solar power to electricity, was declared bankrupt on Wednesday, ringing alarm bells in China's solar industry.

In a news release, the company said it was involved in bankruptcy court proceedings in its home city of Wuxi, in eastern China's Jiangsu province. The proceedings resulted when a group of eight banks petitioned Wuxi Municipal Intermediate People's Court to declare Suntech's main operating unit in China insolvent and order that it be restructured.

The unit, Wuxi Suntech, told the court that it wouldn't file an objection to the petition, according to its parent company's news release on Wednesday. The court will decide in coming days whether to accept the banks' petition. If it does, Suntech will continue making panels and related solar-power products to fulfill customer orders, the release said.

"While we evaluate restructuring initiatives and strategic alternatives, we are committed to continuing to provide high-quality solar products to our global customer base," Suntech Power Holdings CEO David King said in the release. "During this period, we will continue to work closely with all of our stakeholders and take the necessary steps to put Suntech back on track for growth."

The announcement follows Suntech's default on a $541 million bond payment on Friday. On Monday, Suntech had said it was "unaware of any legal proceedings initiated by any noteholders against the company".

The banks pushing for Wuxi Suntech's restructuring are owed a total of about 7.1 billion yuan ($1.14 billion) from loans to Suntech in late February. The group includes Industrial & Commercial Bank of China Ltd, Agricultural Bank of China Ltd and Bank of China Ltd, Xinhua News Agency reported.

Suntech Power Holdings has been badly hit by oversupply in the global market for solar panels and their solar-cell components, and by trade disputes with the United States and the European Union over alleged Chinese dumping and government subsidies to producers.

The company's board of directors ousted Suntech founder Shi Zheng-rong as chairman earlier this month. Shi claims he was improperly removed as chairman and intended to stay. Suntech named board member Susan Wang to succeed Shi as chairman, with the founder remaining in his post as a director and the company's chief strategy officer.

The 21st Century Business Herald, a Guangzhou-based daily, on Wednesday quoted sources as saying that Shi had the support of Wuxi's local government and could return to Suntech as part of a restructuring if the court approves the banks' petition.

Shi founded Suntech in 2002 and took the company public three years later, becoming the world's first solar-energy billionaire.

He obtained credit from China Development Bank Corp that helped him wrest control of the industry from German and Japanese competitors. But a steep drop in prices in recent years has battered the earnings of solar-panel companies worldwide.

Suntech was also hurt by a report in July that it may have been defrauded by a business partner who allegedly provided $680 million in phony collateral, in the form of German government bonds, for a loan Suntech had guaranteed. As a result, Suntech said it planned to restate its financial results for 2010, 2011 and the first quarter of 2012.

The Wuxi government has poured huge subsidies into Suntech. To get that financing, the company sold its products to its overseas subsidiaries to boost its sales figures, according to Chinese media reports.

"Suntech's fall would seriously hit China's solar industry, which has experienced a great deal of turbulence since late 2009," said Cheng Peng, a partner with Adfaith Management Consulting in Beijing.

"Suntech, whose publicly listed entity is incorporated in the Cayman Islands and trades on the New York Stock Exchange as American depositary shares, announced last week that it would close its only US manufacturing facility, near Phoenix, Arizona, on April 3.

The NYSE halted trading of Suntech's ADRs on Wednesday based on the news of the Wuxi bankruptcy petition. The ADRs closed at 59 cents each on Tuesday, a fraction of their $8 price during 2011.

Suntech blamed the upcoming shutdown of its Arizona factory, which opened in October 2010, on higher production costs that were made worse by a global glut of panels as well as the US and European tariffs.

In November, the US Commerce Department's International Trade Commission voted to impose tariffs of 36 percent on imports of Suntech's Chinese-made solar cells. Those tariffs, along with US duties from 2011 on aluminum frames used in manufacturing panels, made it "more challenging" for Suntech to profitably produce panels in the US, the company said in announcing the Arizona plant's closing.

On Tuesday, US Senator Ron Wyden urged the acting US trade representative, Demetrios Marantis, to consider a "global resolution" to "uncertainty" in the solar industry caused by the tariffs. Though he didn't specify China, Wyden appeared to be alluding to trade frictions in the industry involving the US, China and the EU.

"I think it's fair to say there's a fair amount of market uncertainty now with respect to renewable energy, and particularly solar," Wyden, a Democrat from Oregon, said at a Senate Finance Committee hearing on the 2013 trade agenda of US President Barack Obama.

"It seems to me there could be some real value in the United States looking to put together what I've essentially called a kind of global resolution."

In response, Marantis, Obama's key adviser on trade, told Wyden: "We are eager to work with you and ... stakeholders, in terms of determining how to address this issue holistically."

Wyden would likely be a leader in any effort by Congress to resolve the trade disputes. He is chairman of both the Senate Finance subcommittee on international trade, customs and global competitiveness and the overall Energy and Natural Resources Committee.

Orders for Chinese photovoltaic, or PV, solar equipment slumped 80 percent in 2012 from the previous year, according to the China PV Industry Alliance. Up to 90 percent of Chinese producers of polycrystalline silicon - the raw material used in making cells for solar panels - had halted production, while 80 percent of solar-panel manufacturers have either shut down or sharply reduced output, the industry group said.

Gao Hongling, the alliance's deputy secretary-general, said Suntech's fall would serve as a warning to other emerging strategic industries in China, as they face similar problems of haphazard investment and excess production capacity.

As for domestic demand for solar panels, Gao said the central government's target for a 10-gigawatt market this year will help the industry to some extent.

Contact the writers at zhengyangpeng@chinadaily.com.cn and josephboris@chinadailyusa.com