*from www.bloomberg.com, Mar. 21, 2013 (To view original article click here.)
Take Away #1: Investors stand to lose most of the $1.28 billion they put into Suntech Power Holdings Co. (STP) after the solar manufacturer said it wouldn’t resist a bankruptcy petition filed in China.
Key Facts and Figures:
- The company, based in Wuxi, outside Shanghai, had more than $2 billion in debt and defaulted on $541 million in bonds due on March 15.
- Eight Chinese banks were prompted to ask a local court to push Suntech’s main unit into insolvency and the court accepted the petition today.
- A number of companies went Wall Street investors and received billions of dollars, and these investors are ultimately going to be on the hook and get nothing out of it.
- The failure underscores how risks to investors in the solar industry have spread after the collapse of and bankruptcies of large solar manufacturers.
- Solyndra LLC collapsed in 2011 and there have been a number of bankruptcies in Germany including Q-Cells SE (QCE), previously the biggest solar manufacturer.
Take Away #2: Suntech said last week that almost two-thirds of bondholders agreed to defer their rights for two months to give the company time to restructure its debt.
Key Facts and Figures:
- Mount Kellet Capital Management LP, Driehaus Capital Management LLC, and Pioneer Investment Management Inc. were Suntech’s largest bond holders with about 23% of the debt.
- The largest outside owners of Suntech’s American depository receipts are Renaissance Technologies Corp., Invesco Ltd, and Shah Capital Management.
- Sharp Corp. of Japan, which led solar cell-making until 2006, is considering scaling back operations overseas.
- Solyndra collapsed despite $535 million of support form the U.S. Energy Dept.
Take Away #3: It’s unclear how the Chinese filing will affect U.S. creditors, said James Millar.
Key Facts and Figures:
- James Millar, a partner at law firm Wilmer Cutler Pickering Hale & Dorr LLP in New York represents bondholders who own more than 1% of debt.
- “Does a bondholder of a holding company have standing in a Chinese operating unit’s bankruptcy? I think the right answer is that the bondholders should have a seat at the table”, says Millar.
- Investors may lose everything, said Aaron Chew of Maxim Group LLC in New York.
- Suntech raised $742.6 million in two stock offerings in New York, in 2005 and 2009.
- Combined with the $541 million principal on the convertible bonds that matured March 15, it’s received $1.28 billion.
Take Away #4: The company’s bankruptcy filing could leave investors with nothing and the American Depository Receipts (ADRs) plunged more than 99% in value from its high in Dec. 2007.
Key Facts and Figures:
- The ADRs, each worth one ordinary share, plunged to 43 cents at 10:42 a.m. in New York.
- Earlier they reached 30 cents, a record low and a decline of more than 99% from the high of $88.35 in December 2007.
- Trading was halted yesterday after the company announced the bankruptcy filing.
- “You can forget about the equity shareholders,” said Zino of Standard & Poor’s. “I don’t think there’s any way they’re getting anything out of this.”
- Suntech, the biggest solar manufacturer at one time in 2011, suffered from U.S. and European cut backs on renewable-energy subsidies, slowing demand for solar panels, and global oversupply.
- The company has not reported a profit since the first quarter of 2011.
Take Away #5: Suntech hires UBS AG to help renegotiate its debt while it navigates through a complicated Chinese bankruptcy filing.
Key Facts and Figures:
- Suntech hired UBS AG in October to help it renegotiate its debt, and has been talking to local government agencies in Wuxi about receiving financial aid.
- It announced March 11 a forbearance deal with 63% of its bondholders, who agreed not to exercise their rights until May 15.
- Not all bondholders agreed to the deal and some said they were never contacted by Suntech.
- The Chinese bankruptcy filing names Suntech’s main unit, Wuxi Suntech Power Holdings Co., which is subject to Chinese law, complicating the process further.
- The bondholders are creditors of the parent company, which is incorporated in the Cayman Islands.
- The bond prospectus said the debt is governed by New York law. “Any litigation in China may be protracted and result in substantial costs,” Suntech said in its 2011 annual report.
- U.S. creditors must contend with “a fundamental disadvantage that non-Chinese lenders have in a bankruptcy.”
- They would need to get the consent of a Chinese court to get action in China, which the Chinese lenders don’t have to face.
Take Away #6: Suntech says it remains in production meaning the company’s failure won’t do much to alleviate the global panel glut.
Key Facts and Figures:
- That capacity continues to exist in the market, which is clearly not good for the market, says Gordon Johnson of Axiom Capital Management Inc.
- Four of the six top panel manufacturers are based in China.
- Suntech fell to fifth in production capacity last year behind China’s Trina Solar Ltd, Yingli Green Energy Holding Co., Arizona based First Solar Inc., and Canadian Solar Inc.
- The company lost $1.01 billion in 2011 and was expected to report a loss of $460 million for 2012.
*To view original article from www.bloomberg.com click here.