Tatung Co (大同) on Wednesday last week said that its US subsidiary had gained approval from the courts for plans to maintain its operations and work with creditors to restructure its debt.

The US Bankruptcy Court for the Central District of California in Los Angeles approved Tatung Co of America Inc’s (TUS) Chapter 11 filing for bankruptcy protection, the Taiwanese parent company said in a regulatory filing on Thursday.

The unit’s bankruptcy protection followed similar moves by other Tatung subsidiaries: Green Energy Technology Inc (綠能科技) and San Chih Semiconductor Inc Ltd (尚志半導體) in August, and Chunghwa Picture Tubes Ltd (中華映管) last month.

Tatung holds a 50 percent stake in TUS, which mainly manufactures and distributes home appliances and consumer electronics in the US, the parent firm said.

TUS assisted Green Energy in procuring polysilicon and signed a contract with Hemlock Semiconductor Corp and Green Energy in 2011, the filing said.

Polysilicon is a key material used to produce solar wafers and cells. As the material’s price has dropped significantly in the past few years and forced Green Energy to file for bankruptcy on Aug. 30, TUS might face lawsuits from Hemlock, a polysilicon supplier in the US, Tatung said.

“The main reason for the debt restructuring is due to the contract with Hemlock,” Tatung said in the filing.

Tatung chief financial officer and spokesperson Peng Wen-chieh (彭文傑) said that Hemlock in July asked TUS to pay US$5 million in fees, which Green Energy was supposed to pay for a breach of contract.

It later asked TUS to pay US$35 million in total to settle the case, Peng said.

As TUS reported losses of about US$1 million last year and is expected to post losses of another US$1 million this year, the bankruptcy protection is aimed at enabling it to continue its operations while negotiating debt restructuring with creditors, Tatung said.

TUS’ sales accounted for less than 0.1 percent of the parent company’s revenue last year, so its restructuring would not affect Tatung’s operations, Peng said.

Tatung shares on Friday closed down 1.22 percent at NT$16.25 in Taipei trading. They have dropped 37.5 percent so far this year.