Suntech Power Holdings Co., the Chinese solar-panel maker that announced a forbearance agreement for $541 million in convertible debt due tomorrow, fell to a record low after Maxim Group LLP said the company is “likely” to default and enter bankruptcy.
Suntech tumbled 22 percent to 65 cents at the close in New York, the lowest since it began trading in December 2005. The bonds increased to 32 cents on the dollar.
There is “no legal way around the March 15 maturity,” Aaron Chew, a Maxim analyst based in New York, wrote in a note to investors today, citing the bond prospectus.
The company said in a statement March 11 that about 60 percent of the bondholders had agreed to wait until May 15 before exercising their rights.
Such a delay isn’t allowed “without the consent of the holders of each outstanding note affected,” according to the prospectus. Some of the remaining 40 percent of bondholders said they weren’t contacted by the Wuxi, China-based company about a forbearance and want to be paid on schedule.
A default would be the first for a bond issued by a company in mainland China. Suntech, the largest solar panel maker in 2011, has reported losses for the past two years and had about $2 billion of debt as of the end of August, according to a bondholder presentation in November filed with the Securities and Exchange Commission.
If Suntech is taken over by the local Wuxi government, such a bailout is “likely to be targeted only at local employment and bank debt” and will come “at the expense of stock and bond holders,” Chew wrote. He rates Suntech a sell, with a 12-month price target of $0.
A phone message left for Walker Frost, a Suntech spokesman in the U.S., wasn’t immediately returned.