Yingli Signals Bankruptcy Risk as Loss Widens, Sales Fall

  • Chinese company delays 2015 earnings report to assess accounts
  • Yingli continues talks with creditors as payments due May 12

Yingli Green Energy Holding Co. signaled that it may tip into bankruptcy as its losses widened and talks continue with creditors about repaying loans due in two weeks.

The Chinese solar-panel manufacturer said there “is a substantial doubt as to its ability to continue as a going concern.” It asked the Securities and Exchange Commission to delay its earnings report for 2015, saying it’s finalizing an assessment of “control deficiencies” associated with putting its accounts into U.S. standards.

Once the world’s biggest photovoltaic manufacturer, Yingli hasn’t reported a quarterly profit since 2011 and has been in breach of loan covenants for at least a year. It has been kept alive by state-backed lenders led by China Development Bank Corp. Earlier this month, it said it would be “very difficult” to repay 1.4 billion yuan ($216 million) of notes coming due on May 12.

On Friday, Yingli said its losses for 2015 probably would widen because of a series of write-offs, a drop in the cost of solar panels and declining shipments caused by a shortage of working capital.

Its net loss for 2015 will probably widen to as much as 5.9 billion yuan from 1.3 billion yuan in 2014, Yingli said in a statement on PRNewswire on Friday. It expects to file earnings and a 20-F to the SEC “on or before May 16.” The deadline for the filing is May 2. Yingli received 15 days grace in making the submission last year.

Revenue Falls

Revenue will be in the range of 10 billion yuan to 10.2 billion yuan, down from 12.9 billion yuan in 2014. Yingli said shipments of PV modules fell 24 percent to 3.1 gigawatts because its factories worked at a lower utilization rate and “tight cash flow.”

As a result, Yingli said it will write down by 3.8 billion yuan the value of some of its property, plant and equipment. It also made a provision of 522.8 million yuan for inventory built up under long-term contracts supply contracts for polysilicon, the main raw material that goes into PV cells. Yingli also will have a gain of 1.2 billion yuan for selling land associated with its Fine Silicon unit.

Income taxes for the company, incorporated in the Cayman Islands, will rise to about 731.2 million yuan -- more than eight times the level in 2014 -- because of “an assessment on recovery of deferred income tax assets which resulted in an additional valuation allowance.”

Creditor Talks

On April 6, Yingli said it is in talks with creditors about payments due on two sets of securities underwritten by Bank of Communications Co. It said it will be “very difficult” to repay 1.4 billion yuan of notes due on May 12 and that it will make its “best efforts” to pay off the remaining portion of 1 billion yuan of notes whose final installment has been called on the same date.

Friday’s statement from Yingli repeated language from the previous announcement, noting that the Tianwei Yingli unit “is still in the process of actively discussing” repayment for the notes. Yingli has suggested alternatives including a new investor, extended credit lines and the sale of some assets.

It plans to make further disclosures of its financing plans in the 20-F document.

It hasn’t finalized that document or the 2015 accounts because executives are still studying their assessment of deficiencies in accounting controls that cropped up because Yingli was short of people expert in U.S. accounting practices, the statement said.

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