REC Drops to Three-Week Low as Cash Concerns Persist: Oslo Mover

Renewable Energy Corp ASA (REC), the solar maker facing excess capacity and falling demand, fell to a three-week low in Oslo trading as a bank deal easing the terms of its credit facility failed to alleviate concerns over debt.

The shares declined as much as 4.7 percent to 1.11 kroner, the lowest intraday level since March 6, and traded down 3.1 percent as of 11:45 a.m. local time. That makes REC the biggest loser today on the Oslo stock exchange’s OBX index. The stock slumped 14 percent yesterday.

REC’s banks agreed to ease the terms of a 2 billion kroner ($343.3 million) credit facility, meaning there will now be no covenants until the end of the year, the Sandvika, Norway-based company said March 22. The account will be converted into a 400 million-kroner revolving facility, combined with a 400 million- kroner guarantee option, it said.

The agreement fails to resolve the company’s “main financial challenge,” which is about 3 billion kroner of debt maturing in 2014, SEB AB said in an e-mail dated yesterday. While rising polysilicon prices are improving REC’s earnings outlook, “our base case scenario implies REC will be about 400 million kroner short of its maturing debt in 2014, and will thus need a solution for the banks and/or bondholders,” SEB said.

REC’s Chief Executive Officer, Ole Enger, said Feb. 8 that he’s “quite optimistic” his company will be able to refinance its debt.

Unexpected Resignation

REC, like European peers Solarworld AG (SWV) and Q-Cells SE (QCE), is under pressure from Chinese rivals that expanded capacity just as demand slowed, causing solar-wafer and cell prices to plunge. Cuts in renewable-energy subsidies in France, Italy and Germany also hit sales.

Shares in REC fell to a two-month low on Feb. 11 after the unexpected resignation of Chairman Jens Ulltveit-Moe added to concern about the strength of the solar company’s balance sheet.

Ulltveit-Moe, who didn’t give a reason for his departure at the time, resigned in protest at proposals to build a new plant in China, Dagens Naeringsliv reported yesterday. The plan required money REC doesn’t have, the Oslo-based daily newspaper said, citing Ulltveit-Moe.

To contact the reporter on this story: Alastair Reed in Oslo at areed12@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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