LDK Challenges Market With Mega Offer LDK大规模融资方案挑战市场
An interesting test is looming for the struggling solar cell sector, with one of the worst-performing players, LDK Solar (NYSE: LDK) preparing a massive new note offering worth 5 billion yuan, or nearly $800 million, that will test both the market and Beijing in different ways. If market forces prevail and Beijing declines to step in, I wouldn’t be surprised to see this offer collapse completely due to lack of investor interest, potentially resulting in a financial crisis for LDK that could see it become one of the first major victims of the ongoing crisis among major solar cell makers. So let’s have a more detailed look at the situation. Under its new plan, LDK wants to float 5 billion yuan in new bonds, starting with a first tranche worth about $80 million on December 7, or next Wednesday. (company announcement) It says funds raised will be used to pay off short term debt, meaning LDK is sorely in need of cash to repay some of the billions of dollars in debt it owes that will be maturing in the near term. My guess is that the first tranche of this offering will meet with little or no investor interest unless LDK offers very high interest for the notes, which face a very strong possibility of never maturing if the company ultimately has to file for bankruptcy. But LDK, which recently reported a massive $114 million third-quarter loss and is bleeding cash like many of its peers, can hardly afford such high rates. Thus the only other alternative would be for a major state-run institution, under orders from Beijing, to step in and buy the notes at a more reasonable interest rate to keep the company afloat for now. The only problem is that kind of intervention would be a clear case of a direct state subsidy to the industry, just as the US is investigating China for unfairly subsidizing its solar cell makers — a charge that Beijing strongly denies. The result of all this is that Beijing will be under huge pressure not to intervene in this case, and the market is also unlikely to want to help this struggling company, meaning LDK’s options could be extremely numbered at the end of the day.
Bottom line: LDK’s upcoming $800 million offering in new notes is likely to fail without help from Beijing, which is under immense pressure to show it doesn’t unfairly support its solar cell makers.
Related postings 相关文章:
◙ Solar Slips Squarely Into the Red 太阳能行业陷入全线亏损
◙ China Retaliates With Own US Solar Probe 中国启动对美可再生能源补贴调查
◙ New Solar Signals: Slowdown Easing Amid Writedowns 太阳能企业减计库存 行业或将开始摆脱危机
