Friday, August 30, 2013

"Suntech Announces Developments in Restructuring Process" ($STP)

Now we know why someone was hitting the bids after hours tonight!

WUXI, China, Aug. 30, 2013 /PRNewswire/ -- Suntech Power Holdings Co., Ltd. (STP) ("Suntech" or the "Company"), one of the world's largest solar companies, today announced that following productive discussions with its key stakeholders earlier this week in China, an understanding has been reached with its Creditor Working Group led by Clearwater Capital Partners and Spinnaker Capital Limited for restructuring the Company.

The Company intends to immediately commence preparations for implementing a recapitalization plan that contemplates a scheme of arrangement as part of a holistic restructuring of the Suntech Group. The principal components of the restructuring scheme would include:  (i) identifying the key assets to be retained by the Company to allow it to continue its operations at a rationalized scale; (ii) the exchange of outstanding debt into the Company's equity; (iii) the setting of maximum debt levels for the Company's operating subsidiaries; and (iv) the introduction of a new strategic investor that will provide the necessary funding through the purchase of newly issued equity to complete the restructuring process. This will permit the Company to substantially improve its balance sheet and to be well positioned to continue as a major worldwide supplier in the solar industry.

The Company anticipates entering into a restructuring framework agreement in the next week or so to document the understanding that will allow the Company adequate time to execute the restructuring so long as it progresses the recapitalization plan and complies with the other terms in the restructuring framework agreement.

Mr. Zhou Weiping, Suntech's President said, "Important steps forward are being taken towards a new Suntech. During this restructuring period, Suntech has continued to maintain its production and warranty obligations. The restructuring will allow us to cut our costs and optimize our margins and production. Although there is expected to be substantial dilution for our existing shareholders, we believe that these measures will put us in a better and stronger position to serve our current and future customers in China, Japan, the EU, USA and around the world."

As noted in prior announcements, the Board of Directors has recently been reconstituted to a smaller, more geographically focused Board with the skillsets necessary for the development and execution of a restructuring plan. Recent new director appointments are: Mr. Michael Nacson, the new Chairman, who has been based in Southeast Asia for more than 30 years and has extensive restructuring experience, including projects in Hong Kong, China and North America, with a focus on the manufacturing, technology and electronics sectors; and Mr. Kurt Metzger who has lived in Asia for 18 years and has significant experience relating to risk management/debt restructuring, particularly in the sustainable energy sector. Mr. Nacson and Mr. Metzger were nominated by the Creditor Working Group. The Company and the Creditor Working Group will also be working together to identify a full-time executive to assist in the restructuring process and to work with the current management team to rebuild the Company to its former prominent position in the solar industry.

Suntech's Chairman, Mr. Michael Nacson said, "We are pleased that we have been able to make progress on discussions with key stakeholders involved that puts us on a good footing to move forward with a clear business plan."
Scheme of arrangement is the Cayman Islands procedure akin to bankruptcy in the U.S.


Anonymous said...

Wow! I have a number questions for everyone:

Won't 75% of creditors still need to approve a detailed Scheme of Arrangement for it to become binding under Cayman law?

Does anybody think that >25% of bondholders (e.g. long-short hedge funds that bought the debt and short STP) will join the US lawsuits, establish a lien, and force Suntech into Cayman insolvency proceedings with the aim of receiving cash settlements?

Also, how does this plan address and affect the Wuxi Suntech bankruptcy situation?

If Suntech sheds assets, then won't it's liabilities outweigh assets, causing Caymen courts to force the holding company into Compulsory Liquidation?

Do bondholders really believe that state-owned Chinese lenders will convert debt for equity or want to pay to do this if it's unnecessary?

Why would state-owned Chinese lenders ever re-straddle debt onto Suntech assets + take haircuts when they could easily get the liquidity they need by rolling Suntech's Chinese subsidiaries up into a state owned enterprise?

Additionally, will 75% of bondholders approve a swap of debt for equity which would then be severely diluted by an equity issuance (if a white knight can be found)?

Why would bondholders (or a white knight) ever want equity if Wuxi Suntech gets carved out of the holding company by Chinese lenders?

Steve said...

Lots of stock certificate collectors out there today...

Steve said...

Lots of stock certificate collectors out there today...

Steve said...

Lots of stock certificate collectors out there today...

Anonymous said...

So this will drag out for at least another two months?

No wonder stock wasn't down today..

CP said...

Why would you think it will drag out much longer?

Anonymous said...

They defaulted in March. It is now Sept. This could easily extend into 2014..

Even if stock goes to 0, I will still lose money on my short with borrowing costs.

Anonymous said...

You don't think the bondholder lawsuit makes a difference?

Anonymous said...

No, Not with the agreement to restructure on the table.

The lawsuit is for holders who own around 1% of the bonds... Clearwater Capital Partners and Spinnaker Capital Limited are running the show for the bondholders..

The company could just be stringing along Clearwater and Spinnaker Capital for the time being.. That is yet to be know.

Even if the minority bondholders win the judgment, what does stock do?

Anonymous said...

What does the company do if the bondholders win and serve the company with a demand for all of its financial records, tax returns, bank account records, and correspondence with creditors (post judgement discovery)?

What does the stock do if those bondholders convince the judge to appoint a receiver?

Anonymous said...

Goodluck getting that information out of China..

Anonymous said...

The info is not very important.

The US federal lawsuit will result in a judgement ruling which establishes a lien and when bondholders become lienholders, they then can force Suntech Holdings into Involuntary Insolvency proceedings (and appoint a Liquidator) under Cayman law.

FYI here are the legal filings:

Anonymous said...

You do have to wonder whether Suntech would want the Deloitte audit workers to sit down with the bondholders and talk about the GSF fraud at a deposition? There is no accountant-client privilege from discovery.

Or what if a receiver is appointed? He could immediately change the locks at the U.S. properties, fire the CEO, and hire accountants to look for the missing money.

Anonymous said...

By the way, the reason why STP is back to $1 is because an insider told Chinese media outlets that a debt-for-equity swap would not be necessary if Suntech Holdings gets acquired or merges with another company.

The insider may be Shi, who owns 33-40% of STP through D&M Ltd, and who would gain the most from this scenario.

Here is the Shanghai Business newspaper report:

Given that STP is not paying it's legal bills, I doubt that Suntech can afford to pay to retain investment bankers, accountants, and lawyers to complete a swap.

The journalist noted that many Suntech bondholders are reluctant to accept equity / the framework agreement.

Furthermore, the journalist noted that the company still has a long way to go to reach an agreement wit the 9 Chinese banks who put Wuxi Suntech into bankruptcy last March and that they will need to agree on a plan to exit bankrupty by December 20 at the latest.

According to the journalist, under (the new, untested) Chinese bankruptcy law, Wuxi Suntech has no relationship with Suntech Holdings so long as it remains in administration.

Anonymous said...

Can Suntech even afford Deloitte to do the re-filing they need to do to remain listed on NYSE?

Anonymous said...

They probably can't afford all the accounting work that needs to be done. Deloitte gets to answer discovery requests for free though.

Anonymous said...

FRCP Rule 37