Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) announced Wednesday that eight Chinese banks have pushed its main operating subsidiary into bankruptcy.

The Chinese company was the world’s largest producer of solar panels by 2011 but has been troubled by declining prices.

Suntech HQ

The Chinese manufacturer was highly successful in the solar panel industry with increasing production year after year. Western investors were very confident about the company and were acquiring its New York-traded shares and its international debt issues.

Encouraged by the Chinese government’s effort to rule the renewable energy segment, Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) set up a small factory in Arizona to increase its the production and employed about 10,000 workers in its hometown of Wuxi.

However, the same encouragement from the Chinese government acted as a curse for the players. Chinese solar panel manufacturing capacity grew 10-fold between 2008 to 2012 resulting in a three-quarters drop, in solar panel prices.

Other factors contributing to the declining prices include: increased natural gas production in the United States and a cut in subsidies by the European Union. The 40 percent import tariffs, which the United States imposed last year after an anti-dumping and anti-subsidy investigation, also helped a bit. European Union is also carrying a further trade investigation into the Chinese solar panel shipments that could again hurt the prices badly.

The Chinese banks requested the court in Wuxi on Monday to declare Wuxi Suntech, the operating subsidiary, to be insolvent and begin restructuring it. On Wednesday, Wuxi Suntech informed the court that it has no objection to the insolvency petition by the banks.

The parent company, Suntech Power said that it would continue to honor warranties on the company’s solar panels.

There are talks going around that the bankruptcy filing will result in a takeover of the Wuxi operations by Wuxi Guolian, a financial conglomerate controlled by the city government of Wuxi. Wuxi Guolian’s may be involved in Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) acquisition, according to a woman at the company’s headquarters on March 13.

Yesterday only, Suntech Power appointed a new president, Weiping Zhou. Mr. Zhou was previously the chairman of the company’s futures trading subsidiary and have earlier worked with Wuxi Guolian.

Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) in the statement announcing the bankruptcy of Wuxi Suntech made no mention of Wuxi Guolian. David King, the chief executive of Suntech Power said that the company “will continue to work closely with all of our stakeholders and take the necessary steps to put Suntech back on track for growth.”

The solar panel maker is listed on New York Stock Exchange and enjoyed a market capitalization of $16 billion at its peak.  Last Friday, the company missed on the payment of $541 million worth of convertible debt.