* Says reduced workforce by 4113 employees in the fourth
* Says working with bankers to bring in fresh capital
* Says will continue to get support from China-based banks
* Posts seventh quarterly loss
By Swetha Gopinath
April 18 Chinese solar panel maker LDK Solar Co
Ltd, which partially defaulted on a bond payment this
week, said it was in the process of securing a 2 billion yuan
($324 million) credit facility as it struggles to meet looming
The company, which has more than $3 billion in debt,
reported its seventh straight quarterly loss on Thursday due to
a prolonged slump in panel prices.
Like many of its domestic rivals, LDK ran up huge debts to
expand manufacturing capacity before being hit by the euro zone
crisis that triggered a collapse in demand for solar panels.
It must repay two-thirds of its outstanding debt in about a
year, according to analysts' estimates.
LDK partially defaulted on a $24 million bond payment on
Monday, citing a "temporary cash-flow shortage".
The company was working with bankers to bring in funds to
meet working capital needs, Chairman Xiaofeng Peng said on a
conference call with analysts.
The company's total debt is about 105 times its total
equity, the highest among its peers, according to Thomson
The chairman also said LDK was seeking a strategic investor
to lower its debt-to-equity ratio.
The company is working closely with banks, lenders,
creditors and even government institutions, LDK said.
Bigger rival Suntech Power Holdings Co Ltd's main
unit in China was pushed into insolvency as it defaulted on $541
million in bonds due March 15, though it was able to strike a
deal with 60 percent of the noteholders.
LDK may be able to pressure its lenders to take a cut to
bring down its debt levels, said Glenn Gu, a China-based analyst
for business information provider IHS.
James Dinsmore, a portfolio manager at Dinsmore Capital
Management in Morristown, New Jersey, said companies sometimes
work with holders of convertible bonds to come out with a new
"It's possible that current holders would view an exchange
as superior to the alternative of dealing with a bankruptcy in
China," he said. His firm does not own LDK bonds, but owns notes
issued by Trina Solar Ltd.
BANKING ON THE GOVERNMENT?
LDK will continue to get support from China-based banks,
company executives said on the conference call.
LDK has already struck a deal with the government of its
home city, and received a $71 million loan from the China
Development Bank Corp, but analysts questioned whether
the firm can rely on the Chinese government's backing.
China's State Council, the country's cabinet, last December
indicated that the government would stop propping up loss-making
"LDK, which is even more over levered than Suntech, should
not expect a bailout from China's central government," said
Raymond James analyst Pavel Molchanov, adding, however, that
local governments could step in.
"For the local and provincial governments, the priority is
simple - keeping fabs open and workers employed," he said.
LDK solar said its employee count was down 4,113 since Sept.
30. Including the job cuts disclosed on Thursday, LDK has laid
off roughly 13,000 people in the past year.
It had 9,845 employees as of Dec.31.
SEVENTH QUARTERLY LOSS
LDK said it would focus on the emerging solar markets such
as China, Africa, India and the United States, but warned that
the demand for solar panels would remain weak in the near term.
Net loss hit $517 million or $3.68 per American Depositary
Share (ADS) in the fourth quarter, compared with $588.7 million
or $4.63 per ADS a year earlier.
Net sales fell nearly 67 percent to $135.9 million.
LDK's free cash flow - cash generated from operations after
subtracting capital expenditure - has been negative since the
company was established in 2005, Thomson Reuters data showed.
The company expects its revenue to fall to $80-100 million
in the first quarter, with wafer shipments of 260-270 megawatts
(MW) and cell and module shipments at 30-40 MW. In the fourth
quarter, LDK shipped 184.7 MW of wafers and 69.1 MW of modules.
LDK shares were down less than 1 percent at $1.07 in morning
trade on Thursday. The stock has fallen 75 percent from the
start of 2012 through Wednesday's close.