The local government has decided to invest 1 billion yuan to bail out the debt-laden electronics giant SVA Group, one of the largest State-owned companies in the city, according to recent media reports.

The firm may post 1.8 billion yuan in losses for 2008, and has been unable to get a loan from banks and pay salaries. The government would have to liquidate its debt via national appropriations and reconstruction, an anonymous source close to the matter was cited by 21st Century Business Herald as saying.

There are two Shanghai-listed companies and over 30 joint-venture enterprises under the LCD panel maker. In 2007, SVA posted 34.6 billion yuan in sales revenue.

"The authorities have established a special management team from Shanghai Yidian Holding and SVA to deal with insolvency," the source said, "The local government will allocate State-owned assets worth 1 billion yuan to clear the debt."

SAV spokesman Chen Dong did not deny the media reports when reached by China Daily, but refused to elaborate, saying its "listed companies will post a notice on the issue".

Yang Guoxiong, director of the State-owned Assets Supervision and Administration Commission of the Shanghai municipal government, made a similar comment.

SVA's two listed companies, SVA Information Industry Co Ltd and SVA-Electron Co Ltd, have been suspended from trading since Tuesday.

Both of the subsidiaries said they expect to make losses for 2008. SVA Information said it was likely to lose up to 100,000 yuan, while the other was likely to lose about 1.1 million yuan. The two firms had posted gains in 2007.

"It's no surprise that SVA group is in such tough conditions, as it has seen product transformations many times, which require billions of yuan. And the LCD market has been oversupplied for many years. The dropping demand and fierce rivalries have pushed many companies to exit the industry," said Zhang Hongdao, an analyst with Huatai Securities.

(China Daily April 2, 2009)