UPDATE 1-Suntech's $541 mln bond default triggers more breaches

Mon Mar 18, 2013 10:05am EDT

* Says in talks with lenders and suppliers

* Says unaware of any legal proceedings by any note holder

March 18 (Reuters) - China-based solar panel maker Suntech Power Holdings Co Ltd said it defaulted on $541 million of its bonds due on Friday, triggering cross-defaults on loans from International Finance Corp and Chinese lenders.

The failure to pay the principal amount on the 3 percent convertible notes could lead to lawsuits against the company. Suntech bondholder Trondheim Capital Partners LP told Reuters last week it would sue the company in case of a default.

"For a U.S. solar company, bankruptcy under such circumstances would indeed be inevitable," said Raymond James analyst Pavel Molchanov.

"For Suntech, however, it is plausible that bankruptcy (and the associated stigma in the industry) could be avoided - but only if the Wuxi government (or other public authorities) provide enough near-term liquidity support."

The government of the city of Wuxi, China's solar technology hub, has been in talks with the company regarding a bailout, people with knowledge of the matter told Reuters last week.

The solar panel maker said in a statement on Monday it was unaware of any legal proceedings by any note holders and that it was in talks with certain suppliers and lenders regarding other claims for non-payment or non-performance.

Suntech's public relations adviser, Weber Shandwick in Shanghai, declined to comment beyond the statement.

Suntech had total debt of $2.2 billion as of March 2012, including loans from China Development Bank and a $50 million convertible loan from the IFC, the private arm of the World Bank.

Holders of more than 60 percent of the 3 percent notes had agreed not to exercise their rights until May 15, and Suntech said that those lenders would cooperate with it in addressing certain legal proceedings that might be initiated.

Suntech said it understands that those note holders have requested the trustee for the notes, Wilmington Trust Co, not to take any action as restructuring discussions continue.

The company is exploring strategic alternatives with lenders and potential investors, Chief Executive David King said.

"I see this as a protracted affair," Himanshu Shah, chief investment officer of Shah Capital, told Reuters on Friday. "There could be some compromise with the bond holders, but the damage has already been done."

Shah Capital exited Suntech in early January.

Suntech, which has been losing money for almost two years due to a steep fall in prices of solar panels as result of an oversupply, said it was seeking additional sources of capital.

Suntech shares rose nearly 3 percent in early trading to 72 cents. They rose 27 percent on Friday.

Volatility in Suntech's stock is to be expected until there is more clarity on how the Wuxi government's effective takeover of the company will work, Molchanov said on Friday.