China's Suntech may sell assets, seek strategic investor-source

HONG KONG, April 10 Wed Apr 10, 2013 6:02am EDT

HONG KONG, April 10 (Reuters) - Cash-strapped Chinese solar panel maker Suntech Power Holdings Co Ltd is seeking to sell some assets and bring in a strategic investor to repay debt and revitalise the company, a person with direct knowledge of the matter told Reuters on Wednesday.

"It is looking for buyers for some of its projects and downstream assets," said the source, who asked not to be identified as he was not authorised to speak to the media. "It is also seeking to bring in a strategic investor to take a stake in the company."

"Suntech is in dire need of cash," the source added.

He gave no details on how any stake sale would be structured or how it would affect existing shareholders.

A spokesman for Suntech Power, whose shares are traded on the New York stock exchange, declined to comment.

In what analysts said was one of China's biggest corporate failures in recent history and could also be the first big test of China's bankruptcy law since it was introduced in 2007, Suntech Power - China's largest solar panel maker - said last month its biggest subsidiary Wuxi Suntech was bankrupt but would undergo government-led restructuring.

A court in the eastern Chinese city of Wuxi, where Suntech is headquartered, has appointed a committee consisting of local government representatives and accounting and legal professionals to administer the restructuring.

Suntech says it is to explore strategic alternatives with lenders and potential investors. It will also continue production, keeping workers in their jobs and avoiding potential unrest, sources say.

The Chinese government has been reluctant to let debt-ridden solar firms go bankrupt due to fears of unrest among the tens of thousands of people employed in the heavily subidised sector, which has built more panels than it can sell. Suntech's main factory is in Wuxi, where it employs about 10,000 workers.

Suntech Power had total debts of $2.2 billion at the end of March 2012, and has been badly hit by an estimated 66 percent fall in solar panel prices in the last two years as the euro zone debt crisis has led to countries like Germany slashing subsidies for renewable power.

Suntech Power defaulted on $541 million of its dollar-denominated bonds due last month, triggering cross-defaults on loans from the International Finance Corp (IFC) and Chinese lenders including Industrial and Commercial Bank of China , Agricultural Bank of China and Bank of China .

In light of the sharp deterioration in overseas solar panel demand over the past year, Suntech's net debt-to-equity ratio of around 200 percent as of March 2012 must have since increased sharply, analysts say. Suntech Power has yet to release its 2012 annual results.

HEYDAY

In its heyday, Suntech was a symbol of China's green technology ambitions.

Suntech's market capitalization peaked at about $16 billion in late 2007. It now stands at about $112 million despite a sharp rally this week after a Hong Kong-based news portal owned by Hong Kong Economic Times cited unnamed sources as saying that U.S. billionaire investor Warren Buffett's MidAmerican Energy Holdings Co may be interested in acquiring Suntech Power.

Suntech has said it does not comment on market speculation.

Some solar sector analysts shrugged off the rumour, saying few investors would want to consider taking over Suntech Power now given the restructuring of its Wuxi unit had just begun and the demand outlook for the industry remains gloomy.

Suntech has an estimated total solar module manufacturing capacity of 2,400 megawatts.

The task-force set up by the Wuxi court to revamp Wuxi Suntech was in talks with several strategic investors as part of the restructuring, Yang Erguan, head of the restructuring team, was reported as saying in Xinhua Daily, the flagship official newspaper of Jiangsu province, early this month.

The newspaper gave no details.

Yang could not be reached for comment. A spokeswoman for the Wuxi court said she had no comment.

The source with direct knowledge of Suntech's search for a cash infusion said among the assets the company was potentially looking at disposing of was its stake in GSF Sicar, a Luxembourg-based investment fund investing in developing and operating solar projects with a focus on Italy.

A sale of the stake could generate hundreds of millions of dollars in cash for Suntech Power, analysts say.

The Wuxi restructuring team and Suntech Power's management have been examining Suntech's assets - including stakes in suppliers of polysilicon - raw materials used for solar panel manufacuturing - for potential disposal, he said, adding that the restructuring of the Wuxi unit will take up to nine months.

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