Tuesday, February 5, 2013

Suntech Power Bonds Yield Over 1100%! ($STP)

Just some tiny bond trades today, but yields were over 1,100 percent! With a maturity in 37 days, it's a bad sign to see price declining, low volume, and rising yields on the bonds.

What would make anyone think the equity is worth anything?


C.R.L. said...

By Arie Shapira
Feb. 6 (Bloomberg) -- Suntech has 50% odds of declining 50%
“in next 50 days,” Raymond James analyst Pavel Molchanov says;
co. has convertible debt >$500m due by March 15.
• Sees most likely scenario as “heavily dilutive” equity issuance due to restructuring of convert
• Sees 35% odds of bankruptcy, 15% probability of non-dilutive outcome
• Raymond James rates STP underperform
• STP has 0 buys, 3 holds, 12 sells w/ avg PT 82c
• STP up 71% since beginning of Dec. vs TAN ETF up 29%
• NOTE: Citi earlier expanded global solar coverage; initiated STP at sell w/ PT $1.50, citing Global Solar Fund concerns, lack of financial results and liquidity concerns

C.R.L. said...

I value the equity @ 0

effmanny said...

March options expir ends Friday March 15 at 4pm eastern.

Same day the bonds are due. Question is what time? Will there be hours on March 15 where you can still trade options and STP is officially in "default"?

CP said...

Thanks for that RJ link. The equity is clearly worthless.

It seems like it's too late to restructure the convert. Only 36 days away and we haven't heard a peep.

I guess this weekend would be the last possible opportunity.

CP said...

Options actually don't expire at market close on Friday, they expire on Saturday.

Whether your broker would allow you to exercise them after the close is your business.

C.R.L. said...

The equity would presumably be close to nothing a fews day before the bond maturity IMO.

CP said...

Yes, that's possible (since it would be pretty obvious they were going to default).

It's also possible the company would file BK / announce intent not to pay on the morning of 3/15, which would also be a catalyst.