China's Comtec Solar shares take hit on TPG restructure

HONG KONG (Reuters) - Shares in solar wafer maker Comtec Solar (0712.HK) fell over 4 percent on Thursday after the Shanghai-based company agreed to buy back convertible bonds issued to TPG Capital, in a sign that a glut in the industry is putting expansion plans on hold.

Late Wednesday, Comtec Solar said it would pay U.S. private equity fund TPG TPG.UL 491 million yuan ($77 million) to repurchase its convertible bonds to reduce its debt levels. TPG made the investment less than a year ago.

But with the industry suffering from oversupply and heavy debt loads, Comtec, along with many of its peers, is going slow on expansion and cutting debt.

"The repurchase will reduce Comtec's ability to undertake expansion going forward as they will have little money left after returning TPG's investment," said Keith Li, analyst at CIMB Research.

"Comtec is just one of many holding back on expansion, given the negative outlook in the solar sector amid overcapacity and weak demand."

Many China-based companies, which produce the majority of the global supply of solar panels, are suffering, as heavy debt threatens their survival.

China's state-run banks opened billions of dollars in credit lines to the industry there and helped drive a proliferation of companies that now number in the hundreds.

Most are small producers that appear to be selling modules -- or the wafers and cells used to build modules -- at a loss, creating a huge oversupply of products that pressures prices across the global supply chain, analysts say.

TPG had agreed to invest up to $150 million in Comtec through a convertible bond in April 2011, betting on rising demand for renewable energy technology.

Under the restructured deal, Comtec will buy back 75 percent of its outstanding convertible bond with cash for 491 million yuan, and cancel 75 percent of its warrants to TPG.

The 2011 deal would have given TPG around 21 percent of Comtec if fully converted. Under the new deal, TPG will subscribe to 94 million new warrants, which if fully exercised will give the fund 7.7 percent of the enlarged share capital of Comtec.

Comtec shares had surged about 89 percent in the 12 months before TPG's April 2011 investment, but lost 74 percent after the investment to the end of the year. By Thursday afternoon, the shares were down 4.1 percent at HK$1.39, while the benchmark Hong Kong share index .HSI was up 1.2 percent.

(Reporting by Stephen Aldred and Leonora Walet; Editing by Denny Thomas and Jonathan Hopfner)