LDK Solar Co. (LDK:US), the world’s second- biggest maker of wafers used to make solar cells, missed the deadline to repay $23.8 million in bonds that matured yesterday because of a cash shortage.
The manufacturer based in Xinyu City, China, said it reached settlement with two holders of the notes controlling $16.6 million of capital, providing a partial payment and postponing the final payment. It said it’s “ready and willing” to discuss a settlement for the remaining notes in a statement today.
The move takes LDK a step closer to a default on its debts, which top $3.1 billion after the cost of solar panels plunged and slashed the margins of panel makers across the industry. LDK may mitigate the impact of its failure to repay if it manages to negotiate a settlement with the rest of the holders of the 4.75 percent notes.
“Everyone knows that cash flows are stressed but there was a feeling that the company would be able to manage this one,” said Amit Jain, an analyst at SJS Markets Ltd. in Bangalore.
LDKs American depositary receipts, each worth one ordinary share, fell 9.8 percent to $1.01 at 9:40 a.m. in New York. Earlier they slumped 17 percent, the most intraday since March 14.
Last month, LDK’s bigger rival Suntech Power Holdings Co. defaulted on $541 million of bonds, prompting its lenders to push the main unit of the solar manufacturer into a bankruptcy court in China. The court is now reviewing how to restructure Suntech’s unit and its debts.
“The defaults will make others harder to raise financing and face stricter credit rating,” Lian Rui, a Beijing-based analyst at research company NPD Solarbuzz, said by phone today. “LDK can only restructure its various debts through negotiations.”
The company must repay a $240 million loan by June 3. Terms of that loan require it to spin off its polysilicon unit through a public share offering, according to regulatory filings.
LDK, which reports fourth-quarter results this week, had net debt (LDK:US) of $3.1 billion at the end of September, according to data compiled by Bloomberg.
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