LDK follows Suntech in bond default

Embattled Chinese PV group LDK Solar has missed its repayment date on a package of convertible bonds totalling $23.8m excluding interest, following Suntech to become just the second company from mainland China ever to default on its bonds.

The Jiangxi-based manufacturer says that in recent days it privately negotiated a settlement with two bondholders that will allow it to postpone repayment on bonds worth some $16.6m.

However, it has informed the Bank of New York Mellon – trustee for the holders of the convertible notes – that it will not be able to pay the remainder on time.

The notes, which held a 4.75% coupon, were due on 15 April.

LDK is “ready and willing to discuss and reach a settlement for the remaining convertible notes”, it says.

While the amount of money at stake is relatively small by the standards of New York-listed LDK, which hauled in revenues of nearly $2.2bn last year, the timing could not be worse, coming hot on the heels of Suntech’s stumble into bankruptcy.

On 15 March Suntech defaulted on a $541m package of bonds, and five days later it acknowledged that its principal operating subsidiary had been pushed into insolvency by a clutch of Chinese banks – setting in motion a new round of speculation about whether China's government will be able to countenance the demise of such a high-profile renewables company.

Suntech is reported to be looking at various ways of raising money, including selling its Italian PV assets, which had previously been wrapped up in fraud allegations. Under any scenario, however, Suntech’s debt holders would need to make painful concessions for the company to stand a chance of getting back on solid footing.

LDK was the world’s second-largest supplier of PV wafers last year, with more than 4GW of capacity, and in recent years it has diversified aggressively downstream into cell and module production and project development.

Like all PV manufacturers, LDK has been hit hard by falling module prices. But the real albatross around its neck is the 30,000 metric tonne Ma Hong polysilicon factory it is building in Inner Mongolia, which remains uncompetitive despite the company having already invested some 12bn yuan ($1.95bn) into the plant.

In a bid to raise money, LDK recently sold $31.1m new shares to Fulai Investment Unlimited, which will allow the British Virgin Islands-based investor to install two non-executive directors on the company’s board.