Monday, August 5, 2013

"Chinese banks face losses over Wuxi Suntech Power loans" ($STP)

Article in Financial Times about Suntech today:

"Chinese banks that lent money to solar-panel maker Wuxi Suntech Power... are facing substantial losses on their loans, according to the company’s other creditors.

While the total liabilities of Wuxi Suntech – which is the principal operating subsidiary of the US-listed Suntech Power Holdings – remains in dispute, creditors have said the figure is at least Rmb10bn ($1.63bn), while its assets may be less than a quarter that amount. [...]

However, while Beijing is determined to pursue reforms, vested interests at a local level are likely to resist. The banks are in intensive talks with the administrator in Wuxi, a city in Jiangsu province not far from Shanghai. 'The Chinese banks are pressing for full payment and want the Wuxi local government to bail them out,'"
Does Wuxi have that much money to throw away? It has a population of about 6 million people. Surely they have better uses for their money, especially given all the other troubled credits in China.


Anonymous said...

The Chinese banks need cash and are putting pressure on Wuxi Suntech to sell assets and/or liquidate.

Wuxi government is trying to avoid a liquidation to preserve jobs/tax revenues at Suntech and suppliers in Wuxi.

Wuxi Suntech and its Chinese creditors have to agree on a plan to exit insolvency proceedings by September 20 (6 months from March 20) but can also file for an extension (although the court may not permit an extension unless all creditors reach an agreement to do so).

Reuters reported better info on the strategic investment proceedings today:

There seems to be some bidders interested in STP assets (e.g. the factories/staff in Wuxi and/or share of government-imposed export quotas to EU markets).

Could any of the China-based solar companies take on the debt to acquire or control Suntech Wuxi?

How much cash could Suntech Holdings generate from Wuxi Suntech asset sales?

Since the $541M convertible bonds are trading at 23%, it seems like Suntech needs to raise >$100M cash through assets sales and/or an equity infusion alongside the debt-for-equity swap that's being negotiated with bondholders.

If STP is unable to do so, then more bondholders will join the NY lawsuit, create a judgment lein in NY, and force Suntech Holdings into insolvency proceedings in the Caymen Islands.

If STP is able to do so, then current equity holders are looking at a >80% dilution (following a debt-to-equity swap as well as a reverse split).

Additionally, shareholders may wind up with $0 if either Wuxi Suntech is forced to be merged with a state-backed entity by Chinese banks or Suntech Holdigns is forced into insolvency proceedings in the Caymen Islands by holders of $541M convertible bonds.

Anonymous said...

Chinese media is reporting that 4 of the 5 earlier reported companies have been given access to Wuxi Suntech information and are cautiously considering a bid.

The 4 companies are:
1) Changzhou Trina Solar Ltd (a wholly owned subsidiary of NYSE:TSL)
2) Baoding Yingli Group (an affiliate of NYSE:YGE that guarantees Yingli credit lines and is controlled by Yingli's founder, Chairman and CEO, Liansheng Miao)
3) Beijing Putian New Energy Technology Development Co. (a JV between the state-owned enterprises SASAC China Putian and CNOOC New Energy which is the largest vehicle charging network in China)
4) An unspecified electric power/utility company based in Xi'an (that is a state-owned enterprise)

It may be that the state-owned Wuxi Gualoan Development Group did not submit a letter of intent as it already has access to Wuxi Suntech information (since the former head of Wuxi Gualoan's finance department was appointed as the administrator of Wuxi Suntech).

The bidders may find the account receivables of Wuxi Suntech attractive but the $1.75 billion US dollar debt total makes a buyout highly controversial, in particular for Trina (which is unable to assume all of Suntech's debt according to it's latest financial reports).

The reporter also noted that: 1) Wuxi Suntech's management has no plan for repaying outstanding debts, 2) Wuxi administrators and Chinese creditors have failed to agree on a rescue plan for Wuxi Suntech to restructure and exit bankruptcy, 3) Wuxi's government is unable to bear the debt by itself but may be able to make a bid more attractive for bidders (through tax incentives and the like), and 4) Wuxi administrators are getting anxious for a bid -- not only because of the NY lawsuit, but also since Wuxi Suntech is operating at a loss, it's inability to provide financing to customers is hurting cash flow, and it's suppliers are demanding cash-only purchases, all of which are adding pressure to already strained resources; Wuxi administrators also expect the Chinese creditors will write-off debt to avoid a liquidation.

Anonymous said...

There were stories today in Chinese media asking: "who would "bargain hunt" for Suntech?"

Reporters are questioning the Wuxi newspaper report on the 4 potential strategic investors (listed above).

Neither Trina, nor Yingli press offices are confirming that they are conducting due diligence on Wuxi Suntech.

Sources stated that even if there was attractive financing instead of unattractive debt, Chinese solar companies are simply not interested in adding capacity or increasing operating expenses.

An unspecified source who works for Trina has the opinion that the Suntech brand + distribution networks are the only thing that either a solar entrant or new energy company might find of value.

Reporters have yet to find any management for Beijing Putian New Energy and are baffled as to why this research based JV would be interested in Wuxi Suntech assets.

An analyst who covers CNOOC (NYSE:CEO ADR) told reporters that it had no desire to talk to solar companies when previous takeover rumors emerged.

The CEO of China XD Electric Co Ltd (Shanghai:601179) denied it is willing to take over Wuxi Suntech in an interview but confirmed that both sides are still talking.