Suntech Power Holdings Co. (STP), the Chinese solar company whose main unit was pulled into bankruptcy, may receive an equity investment of at least $150 million from a state-backed enterprise.
The support from Wuxi Guolian Development Group may also lead to combining other solar and related businesses it owns with Suntech, possibly as joint ventures, the panel maker said in a statement yesterday announcing it had received an investment letter of intent.
Suntech’s main unit was pulled into bankruptcy proceedings after the Wuxi, China-based panel maker missed a bond payment in March. It was the world’s biggest solar manufacturer by 2011 shipments and the potential failure of a company with more than 20,000 employees at its peak in 2010 is prompting state agencies to come to its rescue, said Angelo Zino, an analyst with S&P Capital IQ in New York.
“What we anticipated all along was that the Chinese government will look for ways to support and make sure Chinese tier-one solar manufacturers will continue to survive,” Zino said in an interview. That includes Suntech and other manufacturers struggling with debt such as LDK Solar Co. “The main reason for that has to do with jobs.”
The cash investment from Wuxi Guolian would support “a comprehensive rehabilitation and restructuring of the financial and operational affairs of” Suntech, according to the statement. Suntech failed to repay $541 million in bonds that matured in March.
Suntech’s American depositary receipts, each worth one ordinary share, climbed 10 percent to $1.40 at the close in New York yesterday.
The investment may not be enough, said Pavel Molchanov, an analyst with Raymond James & Associates Inc. in Houston.
“For a company with at least $2 billion in debt, $150 million is certainly not a game changer,” Molchanov said in an interview. “We don’t know what Suntech’s actual financials are right now. They haven’t reported in quite some time.”
Suntech had $2.26 billion in debt at the end of the first quarter, the last time it reported earnings.
Other companies are also seeking to invest in Suntech. Jiangsu Shunfeng Photovoltaic Technology Co. (1165), a unit of Shunfeng Photovoltaic International Ltd., signed a strategic cooperation agreement with the solar company’s Wuxi Suntech unit on Oct. 24, according to the statement.
LDK, China’s second-biggest solar-wafer supplier, ended the second quarter with $2.8 billion in debt. It failed to fully repay $23.8 million of convertible bonds that matured April 15 and is restructuring another $240 million of securities that were due in June.
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