LDK sells 12% stake for $31m

Chinese PV firm LDK Solar has agreed to sell a 12% stake to an investment company for $31m.

The Chinese wafer maker says Fulai Investment – a company incorporated in the British Virgin islands and owned by Hong Kong-based businessman Cheng Kin Ming – will purchase 17 million newly-issued shares of LDK Solar at a purchase price of $1.83 per share.

The proceeds will be used for “general corporate purposes”, says LDK. Fulai has the right to appoint two non-executive directors to the LDK board.

Headquartered in Xinyu city in Jiangxi province, LDK Solar has debts of $3.1bn and is struggling to generate cashflow as prices and demand for its products decline.

The new stake sale “won’t change much for the operating environment of the company,” believes Nitin Kumar, Nomura Securities analyst in Singapore.

However, such sales help LDK “to keep book value positive as current losses are likely to push it to negative", he adds.

LDK previously sold a 20% stake in October to state-backed company Heng Rui Xin Energy.

Banks are also pushing for such stake-sales, in a bid to create significant domestic ownership that would make it easier to pass some tough resolutions otherwise potentially stalled by shareholders, says Kumar.

Chinese media reported in November that LDK was sued by Shanghai Rural Commercial Bank for overdue loans.

About 70% of LDK’s debt is short-term, putting the company under pressure to renegotiate terms with investors amid poor prospects for a shipment pick-up.

LDK’s cash balance fell 96% in the third quarter to $112m as the firm reported yet another quarterly loss.

LDK’s shares rose 7.7% yesterday to $1.97 at the close in New York.