UPDATE 1-LDK Solar sells stake to state-backed Chinese firm

Mon Oct 22, 2012 7:35am EDT

Oct 22 (Reuters) - Chinese solar power equipment maker LDK Solar sold a stake amounting to 19.9 percent of its outstanding shares to state-backed Heng Rui Xin Energy, providing the debt-laden company with some much-needed liquidity.

Heng Rui, which will hold about 16.6 percent of LDK after dilution, will buy the new shares at 86 cents each, a premium of 21 percent to the stock's closing price of 71 cents on Friday.

Heng Rui's investment will cost about $23 million based on 133.5 million shares outstanding, according to Thomson Reuters data.

Heng Rui, involved in solar power and investments, is 60 percent owned by Hi-tech Wealth Investment and Developing Co Ltd and 40 percent by Xinyu State-owned Asset Management Co Ltd..

LDK got a breather in July when the government of Xinyu city in Jiangxi province said it would use taxpayer funds to repay some of the company's loans.

Debt loads at Chinese solar companies have mounted as weak solar panel prices erase profits, leading to expectations that many will be forced to seek extra funding.

LDK has one of the most stretched balance sheets in the industry, analysts say. The company had $296.2 million in cash and equivalents at the end of the second quarter.

Short-term borrowings and installments of long-term borrowings totaled $2.43 billion at the end of the quarter, while long-term borrowings were $854.1 million.

The company has reported a loss for the last five quarters, raising fears that it may be forced to borrow more in the absence of a positive cash flow.

CEO Xiaofeng Peng said last month that LDK was looking to sell a strategic stake.

China's state-run banks have extended billions of dollars of credit to solar companies to prop up the ailing industry.

The China Securities Journal last month reported that China Development Bank Corp would prioritize loans to the 12 top solar companies.

Heng Rui will receive a right to appoint three directors on LDK's board. The companies will also add two independent directors to the board.

According to the company's website, it has seven members on the board.

LDK's shares have fallen 83 percent so far this year.

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