LDK Bonds: Still Some Value in Solar
There’s some interesting data out from LDK Solar (NYSE: LDK), the weakest of the major solar firms, that seems to show the sputtering sector may still have some energy left, even as it grapples with its worst-ever downturn. According to a new announcement by LDK, the company was able to buy back a combined $20 million worth of its debt due in 2013 and 2014 at what I consider to be a relatively modest discount of about 25 percent, or about 75 cents on the dollar. One of the bonds, which it bought for just a 23 percent discount, has a yield of a hefty 10 percent, which may explain the relatively modest discount for a company that constantly seems to be flirting with insolvency. It’s hard to read too much into these numbers, as the size of the buy-back isn’t too big and it’s possible the sale was manipulated to make the discount seem less severe than it really should have been. But if the size of these discounts are even close to market rates, what they tell me is that investors expect struggling bigger names like LDK to get purchased in an upcoming industry consolidation, allowing investors to recoup some of their money, rather than being forced out of business completely. That’s an important distinction for solar energy investors, who have been losing lots of money recently as a steady stream of US-based companies like Solydra file for bankruptcy, meaning stock and bond holders will get back little if any of their investment in those companies. My guess is that the market realizes that China, after supporting its solar sector for years with generous subsidies and other support, will be reluctant to let any of its big players fail, and instead will prop them up with temporary support and then quietly engineer takeovers to salvage as much of their operations as possible and protect investors. If that’s the case, this group of China-based solar players, with strong backing from Beijing, may still yet have some energy and be worth the investment.
Bottom line: A relatively mild discount in a recent deal involving bonds weak solar player LDK indicates investors believe Beijing won’t allow any of these players to fail.
Related postings 相关文章:
◙ Tech, Environmental Issues Cast New Clouds Over Solar Firms
◙ US Solar Probe: Get Ready for China Bashing 美国太阳能调查：炮轰中国大潮的前奏
◙ LDK: An Exploding Star for a Sector in Turmoil
