Thursday, October 24, 2013

Will Wuxi Suntech Be Sold For Pennies On the Dollar? ($STP)

A Credit Bubble Stocks correspondent writes in with translations of two Chinese media articles about Suntech and Shunfeng Photovoltaic (the bidder for Wuxi Suntech assets).

First article

  • The annual Wuxi International Renewable Energy Conference was held on October 24th.  This year's set up seemed to deliberately de-emphasize solar and put more focus on other energy sources.
  • Highlight of the event was the signing ceremony between Shunfeng and Wuxi STP. 
  • The surprising news is that Shunfeng has also done due diligence on a subsidiary of Wuxi STP called Rietech Solar in Zhenjiang (also in Jiangsu province) so the acquisition is not just restricted to assets in Wuxi.  
  • The reason for the signing ceremony is to reassure the debt holders that Shunfeng is serious about the deal.  It's still not clear how much the debt holders will get back. 
  • The Rietech plant has capacity to produce 1.5GW of PV and 300 MW of mono silicon cells and is a very important asset.  The plant is currently at 90% capacity running 2 shifts.  This asset used to be under the Singapore subsidary of STP but was shifted to Wuxi Suntech. 
  • Now the question is how Shunfeng will be able to pay for the acquisition
Second article
  • Talks about the signing but questions whether Shunfeng has the financial ability to carry out the acquisition. 
  • Does the math that the interest cost alone for the bank debt is 560m RMB.  At current market conditions, that amount is larger than the gross profit Wuxi Suntech can generate.  
  • Says that 80% of people interviewed doesn't think Shunfeng is capable of acquiring Wuxi STP.  Thinks that it's all about making a story to raise money


Anonymous said...

Shunfeng is much more likely to either acquire a few of the non-HQ production facilities or make a strategic investment for a controlling stake in the STP Wuxi.

The valuation(s) and/or allocation will be determined by the PRC banks (which are writing off more and more non-performing loans these days).

If Shunfeng is genuinely interested in Wuxi Suntech assets, why wouldn't it wait for the PRC banks to liquidate Wuxi STP?

Anonymous said...

Who cares? For U.S. investors the issue is whether the assets are worth cents on the dollar to the Chinese bank loans. It looks like that's the case.

Anonymous said...

If Shunfeng takes control of STP Wuxi for 1 billion USD, it will likely be given preferential rates to service the remaining $750m STP debt by the Chinese banks.

Anonymous said...

Wuxi govt and Shunfeng may bid as a consortium: .

Any news on the involuntary bankruptcy front?

Anonymous said...

Barrons - Why do these shares continue to trade on the august NYSE?

Two questions must be asked:

Why is the stock rising when filings indicate there will probably be little or no value remaining for equity holders after the company's bankrupt Wuxi Suntech Power subsidiary is reorganized

And why do these American depositary shares continue to trade on the august New York Stock Exchange when Suntech last filed an annual report with the SEC for 2011?

A spokeswoman for the NYSE declined comment.