LDK Solar Co. (LDK)’s disclosure that it’s now about a third of its peak size shows the scale of Chairman Peng Xiaofeng’s efforts to retain control of the Chinese solar manufacturer with more than $3 billion in debt.
The company had about 9,800 employees at the end of last year, Chief Financial Officer Jack Lai said during a conference call yesterday. That’s down 29 percent from the prior quarter and from 28,000 in the middle of 2011. LDK reduced its solar- cell manufacturing capacity last year by 89 percent.
The reductions are part of Peng’s effort to secure credit lines and equity investors to help LDK shoulder its debt load, including $240 million due in June. The company reported yesterday its seventh straight quarter of losses and cash of $98.3 million, the lowest in three years. Deficits of that scale tipped the biggest unit of LDK’s larger competitor, Suntech Power Holdings Co., into bankruptcy last month.
“The biggest concern people have is that LDK will be the next Suntech and go into some form of bankruptcy,” Edwin Mok, an analyst at Needham & Co. in San Francisco, said in an interview yesterday. “The main thesis is that they don’t have that money.”
The solar industry is struggling with a global oversupply of panels after manufacturers expanded production and waning government support slowed demand. That drove down prices 55 percent in the past two years, slashing margins and generating losses at LDK, Suntech and other producers.
LDK is seeking to refinance its debt, including “working with bankers on strategy to bring in more fresh cash capital,” Peng said on the call. It didn’t fully repay $23.8 million in bonds due April 15
The company is in conversations with its three largest shareholders and other potential partners, including its vendors and a U.S.-based manufacturer, “to provide much needed funding from equity point of view to enhance the company’s capital position,” Lai said.
Chinese banks that have backed LDK have already agreed to extend some loans and renew a line of credit, and the company is “in the process of getting a new facility based on the current lenders” for about 2 billion yuan ($320 million), Lai said. “We’re probably going to get a little bit more line of credit to allow the company to get through this very challenging time.”
LDK ended the fourth quarter with $167.2 million in short- term pledged bank deposits, down from $340.7 million in the third quarter and $565.1 million a year earlier. The figure has dropped each quarter since 2009.
“We have substantially reduced our solar cell and solar module production volume in the past months,” Chief Executive Officer Tong Xingxue, said on the call.
Cell capacity is now about 240 megawatts, down from 2.2 gigawatts at the end of 2012, according to filings. Panel capacity fell to 1.5 gigawatts from 2.6 gigawatts. That’s after the sale April 16 of the company’s LDK Solar High-Tech (Hefei) Co. to the municipal government of Hefei, in China’s Anhui province.
LDK’s net loss in the last three months of 2012 was $517 million compared with losses of $136.9 million in the previous quarter and $588.7 million a year earlier, according to a statement from the Xinyu, China-based company.
The company’s net sales in the fourth quarter declined to $135.9 million from $420.2 million a year earlier.
It shipped 184.7 megawatts of wafers and 69.1 megawatts in solar cells and modules. For the first three months of 2013, LDK anticipates $80 to $100 million in sales and shipments of as much as 270 megawatts of wafers and 40 megawatts of solar cells and panels.
“Management seemed pretty confident that they’re going to be able to get support from these Chinese lenders as well as the government,” Angelo Zino, an analyst at Standard & Poor’s Financial Services LLC in New York, said in an interview. “What it comes down to is this: the lenders already have no other choice than to stick with LDK.”
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