GCL-Poly Falls After Announcing $452 Million Rights Offering

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  • Stock falls most in 3 months as shares offered at discount
  • Funds used to cut debt may dilute earnings per share

GCL-Poly Energy Holdings Ltd., the world’s biggest maker of polysilicon and solar wafers, declined the most in more than three months in Hong Kong trading after it announced a plan to raise as much as HK$3.5 billion ($452 million) to reduce debt.

The company plans to issue 3.1 billion rights shares at HK$1.12 each, according to a statement to the stock exchange on Tuesday. The stock closed down 6.8 percent at HK$1.24, the biggest drop since Aug. 31, as the benchmark Hang Seng Index gained 2 percent.

Shares at GCL-Poly probably dropped because the offering is at a discount to the current stock price and the transaction may dilute earnings per share, said Louis Sun, an analyst at BOCOM International Holdings Co. in Shanghai. He cut his rating on the company to long-term buy from buy, partly because of uncertainty over the company’s growth.

The program would shore up the Chinese manufacturer’s balance sheet after the company took on debt to build production capacity only to see the price of polysilicon tumble. Polysilicon prices, which peaked above $475 a kilogram in 2008, have fallen 29 percent this year alone and are now about $14.20, according to Bloomberg New Energy Finance.

GCL-Poly will allot one rights share for every five held. The proceeds from the rights offer will be used to participate in more than half of a rights offering by its unit GCL New Energy Holdings Ltd., reduce debt and fund general working capital, GCL-Poly said.

Rights Issue

GCL New Energy, a solar-farm developer, plans to raise as much as HK$2.5 billion by issuing 5.6 billion rights shares, GCL-Poly said. Its parent will use the proceeds to pay for 3.24 billion of the allotted shares at HK$0.45 each to fund the unit’s project developments.

"GCL-Poly’s leverage has increased significantly between 2009 to 2014 as it massively expanded its polysilicon and wafer production capabilities," according to Bloomberg Intelligence.

The company’s net-debt-to-equity ratio expanded to 157.9 percent in the first half from 143.8 percent at the end of 2014 as it funds solar power plant growth, BI said in a Sept. 30 note. GCL-Poly didn’t give details on how it will cut debt in the statement.

Prices of polysilicon, the raw materials to maker solar cells, have declined more than 30 percent in the past year, while solar wafers were down almost 15 percent, trimming profit at GCL-Poly, Bloomberg New Energy Finance data show.