Suntech strikes yet another deal with bondholders

Fri Jun 28, 2013 11:48am EDT

Employees work on a solar panel production line at Suntech Power Holdings headquarters in Wuxi, Jiangsu province June 3, 2009. REUTERS/Stringer

Employees work on a solar panel production line at Suntech Power Holdings headquarters in Wuxi, Jiangsu province June 3, 2009.

Credit: Reuters/Stringer

(Reuters) - China-based solar panel maker Suntech Power Holdings Co Ltd STP.N said it had struck a deal with a majority of its bondholders to defer payment on a $541 million loan until August 30, the third such agreement in four months.

Suntech defaulted on a principal payment on the 3 percent convertible notes on March 15, prompting the company's Chinese lenders to drag its main manufacturing unit into insolvency proceedings.

Shares of Suntech, which said on Friday it was looking at converting all major debt claims held by the bondholders into equity, fell 6 percent to about 97 cents in morning trade on the New York Stock Exchange.

The stock was down because shareholders are afraid that the debt-to-equity swap would dilute their holdings, said Raymond James analyst Pavel Molchanov.

Lenders holding the senior notes will nominate two additional members to Suntech's board and will help to identify strategic and financial investors to bring in new capital, the company said.

The new board would have nine members.

The company reached a deal with 60 percent of the note holders in March to defer payments until May 15, when it announced that it had struck another deal with some lenders to defer obligations until June 28.

"If the bondholders were not going to get anything anyway, (Friday's agreement) gives them the chance to get something potentially, but a debt-to-equity swap is usually not a great thing," James Dinsmore, a portfolio manager at Dinsmore Capital Management told Reuters.

The firm owns bonds of Trina Solar Ltd (TSL.N).

Analysts and investors have said Suntech's overseas creditors, who hold the convertible bond, will be expected to take a "haircut" or suffer losses.

Trondheim Capital Partners LP and Michael Meixler, who own Suntech debt, earlier this month sued the company for $550,000 due on the bond. The suit was filed in New York State Supreme Court in Manhattan.

At the end of March 2012, Suntech had total debt of $2.2 billion, including loans from China Development Bank, and a $50 million convertible loan from the International Finance Corp, the private sector arm of the World Bank.

"I would say that a debt writedown of at least 75 percent will ultimately be needed to give Suntech a chance of becoming a viable, stand-alone business," said Raymond James analyst Molchanov.

Chinese creditors of the bankrupt unit, Wuxi Suntech, claimed at the start of the debt restructuring process in May that the subsidiary owed them $2.5 billion. The restructuring process is expected to go on for months.

The eastern Chinese city of Wuxi, where Suntech Power is headquartered, is trying to maintain the company's production capacity and save thousands of local jobs.

(Reporting by Swetha Gopinath in Bangalore; Editing by Ted Kerr and Joyjeet Das)

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