LDK Solar Expects to Restructure $240 Million in Debt
LDK Solar Ltd. (LDK), the second most-indebted solar manufacturer, expects to restructure “in the next 30 days” a $240 million debt that was due last week.
A proposal is “in front of investors, going through their respective investment committees,” LDK’s Chief Financial Officer Jack Lai said today on a conference call with analysts.
LDK, based in Xinyu, China, has been unable to pay some lenders after a glut of capacity drove down prices for solar panels. Unlike rival Suntech Power Holdings Co., which was pulled into bankruptcy by creditors in March, LDK’s investors are willing to work with the company on a “rebalancing plan,” Lai said.
“Our preferred share investors are still very supportive to our ongoing operations,” Lai said on the call. It’s the first details about the company’s efforts to renegotiate its obligations since disclosing last month that it has no plans to spin off its polysilicon unit, as required to settle the $240 million debt.
LDK’s American depositary receipts, each worth one ordinary share, dropped 11 percent to $1.46 at the close in New York.
China Development Bank Corp. and affiliates of China Construction Bank Corp. (939) and Bank of China Ltd. provided the funding in June 2011 by purchasing preferred shares that are convertible into a stake in LDK Silicon & Chemical Technology, the polysilicon unit that makes the main raw material in solar cells. LDK agreed to spin off the unit in an initial public offering by June 3.
LDK’s failure to do so means the three state-backed lenders may demand that the company repay the shares plus 23 percent, a total of about $295 million.
They probably won’t, said Angelo Zino, an analyst at Standard & Poor’s Financial Services LLC. He expects lenders to agree to a deal to roll over the debt.
“Time and time again, the Chinese investors continue to back LDK Solar,” Zino said in an interview today.
“China said in December that that they’d consolidate the industry” with fewer, stronger manufacturers coming out on top, he said. “It’s very apparent that LDK is going to be one of those.”
Renegotiating the debt doesn’t solve all of LDK’s issues, Zino said. “The chance of ever seeing these guys return to sustainable profitability remains pretty small.”
This is the second time this quarter LDK couldn’t pay a debt. The company was unable to fully repay $23.8 million of dollar-denominated convertible bonds that matured April 15, due to “a temporary cash-flow shortage,” Lai said today. It has negotiated settlements with holders of $21.7 million of that debt, he said.
A 440 million yuan ($72 million) China Development Bank financing LDK announced in January to upgrade its polysilicon plant in Xinyu China will be finalized this month, Lai said.
The second-biggest maker of wafers used to make solar cells ended the first quarter with $174.1 million in cash, up from a three-year low of $98.3 million at the end of 2012, according to a statement today. LDK, which has shrunk to a third of its peak size, reported a $187.1 million net loss on sales of $104.3 million, the lowest since the first quarter of 2007.
“We are undertaking a number of initiatives focused on the restructuring of our business,” Tong Xingxue, LDK’s chief executive officer, said in the statement. “We are working closely with our stakeholders and relevant governmental agencies to negotiate solutions.”
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