With $5.4Bln Debt, China’s LDK Solar Sparks Fears Among Creditors

With $5.4Bln Debt, China’s LDK Solar Sparks Fears Among Creditors

04-23 18:13 Caijing

Analysts are expecting a forced restructure of LDK, de facto insolvent.The solar manufacturer defaulted on a $24 million bond last week, almost a month after rival Suntech Power Holdings Co Ltd defaulted on its bonds

The teetering of China’s renewed energy giant LDK Solar Co Ltd at the brink of bankruptcy, following a partial default on bond payments last week, has sparked fears among its creditors that they could hardly recover their debts.

Investors are vary of some of the largest creditors —Beijing Jingyuntong Technology Co Ltd (601908.SS), Jiangsu Huasheng Tianlong Photoelectric Co Ltd (300029:Shenzhen), Liao Ning Oxiranchem Inc (300082:Shenzhen), Henan Xindaxin Materials Co Ltd (300080:Shenzhen) and Henan Hengxing Science & Technology Co Ltd (002132:Shenzhen), who was collectedly owed by LDK nearly 500 million yuan with a maturity of around a year—as default risks by LDK castes doubts over the companies that already suffered huge losses.

Analysts are expecting a forced restructure of LDK, de facto insolvent, without improvement in short-term results. While banks, usually the biggest benefactors behind China’s solar makers, could be persuaded to roll out its debt, the suppliers would at any time turn to Chinese courts for the bankruptcy of LDK.The solar manufacturer defaulted on a $24 million bond last week, almost a month after rival Suntech Power Holdings Co Ltd defaulted on its bonds, prompting its lender to push the main unit of the world’s largest solar maker into a bankruptcy court in China. The court is now reviewing how to restructure Suntech’s unit and its debts.

LDK reported net debt of 5.4 billion U.S. dollars and total assets of 5.3 billion U.S. dollars at the end of last year, bringing the debt-to-assets ratio to 102.7 percent from 89 percent in the third quarter.

With increasing financial distress, the company has managed to repay debts by selling assets since the start of last year. According to public data, LDK sold at least twice of its assets to offset debts owed to Oxiranchem and Xindaxin in October and December last year.

The sell-off to trim debts, however, is hardly sustainable with most of its core assets already sold. Financial results showed that ending 2012, the company has less than $100 million in cash and cash equivalent, $167 million in guaranteed bank deposits, and total asset of $646 million up for sale, a tiny sum next to 5.4 trillion in debts.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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