Thursday, March 14, 2013

Suntech Announces It Will Not Repay Bonds Tomorrow ($STP)

"As reported by the Company on March 11, 2013, it has entered into a forbearance agreement (the "Agreement") with holders of over 60% of its 3% Convertible Notes (the "Notes"), for which a principal payment of US$541 million is due on March 15, 2013. The Company does not plan to make such payment and the Company's management is not aware of any pending or planned actions or claims in relation to such non-payment by the trustee or the holders of the Notes."


C.R.L. said...

Stock rocketing today....short covering momos?

jHurt said...

The penny stock lottery players are a far larger demographic than makes any sense. Will take a long time for this to go to 0 - see ATPG (or ATPAQ rather) as an example (up from $0.08 the other week to $0.27 today). Why i prefer to sell calls rather than buy puts on these situations.

Allan Folz said...

Stock rocketing today....short covering momos?

ETF buying. Totally expected. It was in one of comments to an earlier post, though I forget which, or by whom.

Walter said...

Yes, I remember that comment, it's by Steve in this post:

I looked over the rules and didn't see why TAN would be adding here though. Can you explain?

Walter said...

Actually, I think I get it. It says:

"The Index will be rebalanced and reconstituted quarterly on the third Friday of the last month of each calendar quarter, with a reference date for the data being the first business day of the last month of the calendar quarter. "

The ETF is market-cap weighted and would use the market cap on Mar 1. The stock's fallen by 40% since the beginning of the month so TAN needs to buy more in order to correct the weighting based on the Mar 1 market cap. Anyways we can see if this is true tomorrow. As of 3/14 the weighting of STP in TAN is 2.11%. 3/15's weighting should be over 3%.

Steve said...

'TAN' is a funny ETF. It is de facto almost equal weighted, because the 10 largest positions can't exceed 45% of the fund, and the extra weight from the truncated high market cap positions gets reallocated to the 20 or so small market cap positions. That's why I assume that 'TAN' was a buyer today, but I don't know that for a fact. It's not really clear if the etf would have been enough to drive the stock up vs. STP's game of let's pretend we didn't default.

Needless to say, being an equal weight or almost equal weight fund is a bad idea if some of your index members are going to go bankrupt. 'TAN' really needs a new investment mandate.

C.R.L. said...

Wire: Bloomberg News (BN) Date: Mar 16 2013 10:29:48
Suntech Said to Get Default Notice on $541 Million Unpaid Bonds

By Ehren Goossens and Christopher Martin
March 16 (Bloomberg) -- The trustee administering $541
million in bonds from Suntech Power Holdings Co. Ltd. sent the
solar company a notice of default yesterday as the deadline to
redeem the notes passed, a person familiar with the matter said.
The move allows bondholders to sue the Chinese company in
U.S. courts, according to the person, who asked not to be named
because the information hasn’t become public. A default would be
the first by a mainland Chinese company. Suntech said holders of
63 percent of the bonds agreed to delay exercising their rights
for two months until May 15.