Suntech Defaults on $541 Million Bond, a First for China

Suntech Power Holdings Co. Ltd. (STP) became the first company from mainland China to default on its bonds after failing to repay $541 million of notes due March 15, breaching terms of other outstanding loans.

The move pushes what was once the world’s biggest solar panel maker into default on credit lines it has with International Finance Corp. and Chinese domestic lenders, Suntech said today in a statement from its headquarters in Wuxi. China Development Bank Corp (SDBZ). has loans to Suntech.

The move opens the way for Suntech noteholders to sue the company in the U.S., where its shares and bonds trade. Last week, Suntech obtained an agreement of holders of 63 percent of the notes to delay exercising their rights until May 15, allowing executives to press ahead with restructuring payments. Some noteholders not involved in those talks are organizing a rival group and have threatened to sue.

Suntech is seeking “a way forward that will take into account the rights and interests of all of its constituents, including shareholders, noteholders, lenders, customers, suppliers and employees,” Chief Executive Officer David King said in the statement. “We are currently exploring strategic alternatives with lenders and potential investors, which could help to set us on a path towards longer term success.”

Photographer: Ken James/Bloomberg

An employee inspects a solar panel on the production line at the Suntech Power Holdings Co. Ltd. facility in Goodyear, Arizona. Close

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Photographer: Ken James/Bloomberg

An employee inspects a solar panel on the production line at the Suntech Power Holdings Co. Ltd. facility in Goodyear, Arizona.

Banks Advising

UBS AG is advising Suntech. Chinese solar companies are struggling after taking on debt to expand supply, leading to a glut that forced down prices and squeezed profits. LDK Solar (LDK) Co., the second-biggest solar wafer maker, in December hired Citigroup Inc. to help renegotiate its liabilities and obtain “additional flexibility” from creditors.

China has supported solar companies through credit lines from local government or state-backed agencies. solar companies. Suntech, LDK, Trina Solar Ltd (TSL)., Yingli Green Energy Holding (YGE) Co., Hanwha SolarOne Co. and Jinko Solar Holding Co. were among 12 companies that obtained more than $43.2 billion in credit pledges from China Development Bank Corp., according to data compiled by Bloomberg.

LDK, which received a bailout in July for part of its debt from the local authority in Xinyu, said on Jan. 31 that it received approval for a 440 million yuan ($71 million) loan from China Development Bank. Suntech has been talking with the government of Wuxi about the possibility of financial support.

Suntech’s Plan

“Suntech is also continuing its efforts to restructure and increase the cost-efficiency of its operations, maintain business relationships with its existing customers and suppliers, and seek additional sources of capital,” the company said today.

The company said in a March 15 filing to the Securities and Exchange Commission that it didn’t repay the $541 million of bonds due that day. Wilmington Trust (WL), the trustee administering the Suntech bonds, sent the solar company a notice of default after the redemption deadline passed, according to a person familiar with the matter. In today’s statement, Suntech said it had received the notice of default.

Suntech, the world’s largest solar-panel maker as recently as 2011, posted four consecutive quarters of losses through the first quarter of 2012 and since then has failed to report quarterly earnings. Not all companies have published figures for solar company shipments in 2012.

LDK has reported six successive quarters of losses through the third quarter of 2012. Its net debt totaled almost $3.3 billion, according to data compiled by Bloomberg. It’s due to give full-year earnings on April 15.

LDK said today that Liangbao Zhu, a member of the board of directors, resigned from the company effective yesterday.

Zhu, who had also served as executive vice president of the Xinyu, China-based company, stepped down “for personal reasons,” LDK said today in a PR Newswire statement. The company didn’t name a replacement. The resignation comes fewer than five months after LDK replaced its chief executive officer and hired five new board members.

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net; Christopher Martin in New York at cmartin11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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