Suntech Power Holdings Co., the biggest solar-panel maker, may have few options as it seeks to renegotiate its debt, according to Pavel Molchanov, an analyst at Raymond James & Associates Inc.
The solar company, based in Wuxi, China, hired UBS AG as part of an initiative to extend “the maturity of credit facilities” and “evaluate alternatives,” according to a statement yesterday.
Suntech has $541 million of convertible notes due in March, more than triple its market value of $164 million. It has a total of almost $2.3 billion in debt and is expected to report a loss of $495 million this year, the average of five estimates compiled by Bloomberg, as panel prices fall. The company is overleveraged and will face difficulties shoring up its balance sheet, Molchanov said in an interview.
“I’d be interested to see the rabbit Suntech and UBS can pull out of their hat,” he said.
Converting the notes due in March into common equity isn’t a good option because it would be “enormously dilutive,” Molchanov said.
Suntech’s American depositary receipts, down 59 percent this year, fell 1 percent to 91 cents at the close in New York yesterday. Each ADR is worth one ordinary share.
Suntech’s efforts will help the company “return to a sustainable and profitable business model,” Chief Executive Officer David King said in the statement.
Suntech’s statement is one of the “more hollow” ones from a solar manufacturer and “glossed over” its most pressing issues. Aaron Chew, analyst at Maxim Group LLC in New York, said in an interview. “They don’t know how to pay off their debt.”
Suntech is also reducing its production capacity, a step other solar manufacturers should emulate, Amir Rozwadowski, an analyst at Barclays Plc’s investment banking unit in New York, said in a research note yesterday. “Current industry dynamics are simply not sustainable,” he said, and “right-sizing” is needed to “rectify the industry’s supply-demand imbalance.”
Suntech spokesmen didn’t reply to e-mailed inquiries yesterday.