LDK Solar Co. (LDK), the solar-cell producer that failed to make a bond payment in August, asked a Cayman Islands court to appoint liquidators to help it resolve “liquidity issues” before the 1.7 billion yuan ($279 million) note matures this week.
The company remains in talks with creditors and isn’t planning to restructure its debts in China, where it’s based, according to a statement today. LDK is incorporated in the Cayman Islands.
LDK missed a semi-annual payment on the bond Aug. 28 and has announced numerous short-term forbearance agreements since then. The looming Feb. 28 maturity raises the possibility of bankruptcy, Angelo Zino, analyst at S&P Capital IQ Inc. in New York, said today in an interview.
“Our view remains that they are going to be unable to pay that debt, and eventually its going to create a liquidity crisis,” Zino said. “Something has to give. You’re kind of at that breaking point now.”
The company had $95.4 million in cash at the end of the third quarter, and total debts of about $2.78 billion. It said in the statement that it has made progress in talks with bondholders and is still discussing a resolution.
“It just doesn’t look hopeful for them,” said Zino, who has a sell recommendation on the company.
LDK proposed in December two ways to restructure its obligations on the 10 percent notes -- to pay off bondholders at 20 cents on the dollar or exchange the notes for stock.
LDK is seeking to avoid the fate of Suntech Power Holdings (STPFQ) Co., the Chinese panel producer that defaulted on a $541 million bond in March and was pulled into bankruptcy proceedings in China. Suntech now is seeking to sell its largest unit and filed for bankruptcy protection from U.S. creditors in the Cayman Islands on Feb. 21.
“That’s really what happened with Suntech last year,” Zino said. “I don’t see anything different here.”
LDK slipped 1.9 percent to $1.01 at the close in New York. It’s fallen 23 percent this year, while the Bloomberg Global Large Solar Energy index of 17 companies has gained 13 percent.
The company cautioned investors in a May filing that because it’s a Cayman Islands company, investors may have limited means to use U.S. courts to seek judgments against it.
“Shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or controlling shareholders than they would as shareholders of a public company incorporated and existing under the laws of a jurisdiction in the United States,” LDK said in the filing.
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