NEW YORK CITY -- Suntech Power Holdings Co., the Chinese solar-panel maker with $541 million in convertible bonds due next month, is talking with the government of Wuxi about the possibility of financial support.
“The Wuxi government has been looking for measures to bail out Suntech,” said Shi Dinghuan, president of the Chinese Renewable Energy Society and an adviser to the State Council, the nation’s highest executive organization. “The government won’t let this well-known company enter catastrophe easily.”
The comment indicates the breadth of discussions under way between Chinese government officials and solar manufacturers on how the industry can weather a plunge in prices, excess production capacity and the possibility of a trade war with the U.S. and Europe. No Chinese solar company has yet received a bailout for its foreign debts.
Suntech, whose bonds are due March 15, hired UBS AG last year and began talks with creditors about how to refinance the notes following a disclosure that it was a victim of fraud. In December, the company cut its forecasts for solar shipments.
“The government can offer support through tax policies, credit facilities, negotiations and helping consolidation among companies, while it can’t intervene in companies’ operations directly,” Shi said in an interview. “How the bailout works will depend on the local economy and expectations of the solar industry by the local government.”
An official in the information office of Wuxi’s local authority declined to comment, saying talks with Suntech were confidential. Calls to Suntech Chairman Shi Zhengrong weren’t answered, and a company representative said Suntech won’t comment.
China has supported solar companies through credit lines from China Development Bank Corp. and loans from local government authorities.
LDK Solar Co., the second-biggest wafer maker, agreed in October to sell a 19.9 percent stake to an investor in Xinyu, where it’s based. Suntech in September got a $32 million loan that was organized by Wuxi.
Suntech shares have risen 68 percent in the past three months, reflecting increased confidence in the producer and in Chinese solar companies amid a stock-market rebound worldwide. The American depositary receipts closed down 1.4 percent at $1.44 yesterday in New York, valuing Suntech at $259 million.
“There is still hope with some investors who believe China will not let Suntech go bankrupt and, like LDK, will find local government support,” Nitin Kumar, an analyst at Nomura Singapore Ltd., said Feb. 18. He rated Suntech as reduce with a price estimate of $1.
In a presentation to bondholders in November, Suntech said its main options were probably restructuring payments on the bonds, an exchange offer that would convert the securities into stock, or an investment from another party.
In October, China Business News had said Suntech was in talks with Wuxi Guolian Development (Group) Co. and Wuxi Industry Development Group Co. about possible cooperation. It cited unidentified people.
Copyright 2013 Bloomberg
Lead image: Bailout fund via Shutterstock