Suntech Power Holdings Co., the Chinese solar-panel producer that said yesterday it may have been defrauded by an affiliate, will need government intervention to avoid bankruptcy, an analyst said.
Suntech has about $541 million in debt due in March that it may struggle to repay, Aaron Chew, an analyst at Maxim Group LLC in New York, said today in a telephone interview. He lowered his price target for the world’s largest solar-panel producer to zero.
The solar company, based in Wuxi, China, discovered financial irregularities as it was seeking to sell its stake in Global Solar Fund S.C.A. Sicar, which is managed by a former sales representative. That will make it difficult for Suntech to complete the sale, and questions around the transaction make it unlikely that it will be able to raise capital from Wall Street, Chew said.
“The government will orchestrate some sort of buyout,” probably by a state-owned enterprise, Chew said. China doesn’t “want to see Suntech go away. But it’s not a viable operation right now. It’s not solvent. It needs to re-cap.” The company fell 19 percent to $1.08 at 1:18 p.m. in New York.
Suntech guaranteed a 554.2 million-euro ($682 million) loan from the state-owned lender China Development Bank Corp. to a GSF backer, with 560 million euros of German bonds as collateral. Those bonds may have never existed, Suntech said yesterday.
Chairman Shi Zhengrong defended today the decision to funnel business in Europe through GSF. The affiliate “got better returns from developing downstream years ago when tariffs were higher,” Shi said in an interview.