A couple of items from the struggling solar panel sector are showing how the industry is limping forward, receiving minor rescue loans to continue funding operations while manufacturers await a bigger rescue package from Beijing. I can only guess that the bigger package, which has been talked about for much of the last half year, will finally be rolled out by the middle of this year. That will finally allow the industry to try and put itself on more sustainable long-term footing instead of continuing to limp forward in this current state of malaise.

One of the latest news bits is coming from LDK (NYSE: LDK), the unhealthiest of the major Chinese players, which announced it has just finalized terms for a 440 million yuan loan from the Beijing-backed policy lender China Development Bank. Meantime, healthier rival Canadian Solar (Nasdaq: CSIQ) has announced its similar receipt of a $40 million loan to help finance its construction of a new solar plant in Canada. Unlike LDK, Canadian Solar is also being quick to point out that it received the loan from a major western commercial lender, in this case Credit Suisse, rather than having to rely on handouts from Chinese policy lenders.

Let's start with a look at LDK, which is currently in the process of a slow-motion takeover by the Chinese government. LDK recently "sold" one of its most problematic assets to a state-run entity, and also last fall "sold" 17 percent of itself to a consortium of mostly state-owned firms in exchange for a desperately needed $23 million in cash.

I use quotation marks around the word "sold" in both cases, since neither of those 2 deals ever would have happened on the free market, and the only reason they happened at all is most likely because the buyers were ordered to make their "purchases" by Beijing. For anyone who hasn't done the math, this latest LDK loan of 440 million amounts to a relatively modest $70 million, which is perhaps enough to fund LDK's money-losing operations for a few months.LDK says the money will be used to upgrade one of its polysilicon plants, though I suspect much of the funds may end up going to other more practical uses like paying employee salaries.

Meantime, Canadian Solar says its $40 million loan from Credit Suisse will be used to finance its purchase of 4 solar plants under construction in Canada. This kind of solar plant construction is relatively common, which sees third-party builders construct new plants in cooperation with a big panel supplier like Canadian Solar. The panel maker, in this case Canadian Solar, would then typically purchase the plant upon its completion, and try to sell it to a commercial power producer.

But in this case, the builder apparently ran out of funds before the completion of construction, forcing Canadian Solar to announce it would step in to buy the plants before their completion. While Canadian Solar should be commended for financing its deal from a private commercial lender, the fact remains that it and the rest of the sector are facing growing financial pressure due to their massive losses amid the industry's current state of oversupply.

Look for a few more of these "band-aid"-style loans to be announced over the next few months as companies look for ways to keep funding their operations. But in the meantime, all eyes will be on Beijing as everyone looks for the central government to announce its bigger industry-wide bail-out package by the middle of the year.

Bottom line: New loans for LDK and Canadian Solar represent short-term fixes for the companies, as everyone awaits a broader rescue package from Beijing.

This blog was originally published on Young's China Business Blog and was republished with permission.

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