Bottom line: Yingli is likely to get sold or announce a major government-led restructuring, which could include bankruptcy, before a new round of 1.4 billion yuan in bonds comes due next month.
Yingli shrivels under crushing debt load
In what looks like a case of deja vu, fast-shrinking solar panel maker Yingli (NYSE: YGE) is in the headlines again as it looks set to default on 1.4 billion yuan ($220 million) worth of bonds set to come due next month. The default would be Yingli’s second within a year, after it failed to pay off part of another big bond that matured last October.
Yingli is still working to repay the remaining debt from that earlier bond, which amounts to another 1 billion yuan. That means that Yingli now needs to find some $375 million in funds to repay all of its maturing debt by the time the new round of 1.4 billion yuan in medium-term notes come due on May 12. That looks all but impossible for a company that’s bleeding money, which resulted in a $500 million net loss during its latest reporting quarter. Read Full Post…
The solar power sector has become a highly volatile place these days, with company stocks rallying one week on upbeat news, only to tumble days later on more downbeat signals. Much of the volatility owes to 2 factors that have created big uncertainty: protectionism and doubts about funding for many new power plants now being announced. Both of those factors are at play in a new string of downbeat news on industry lead Canadian Solar (Nasdaq: CSIQ), as well as struggling Chaori Solar (Shenzhen: 002506) and the now defunct former superstar Suntech. Read Full Post…
Yet another firm is teetering on the brink of default for a relatively large bond, joining a small but growing list of such companies as Chinese investors learn about the risk of buying debt from shaky companies in struggling industries. This time it’s a little-know construction company called Huatong Road & Bridge Group that’s warning it could soon default on interest and principal payments for 400 million yuan ($65 million) in bonds set to mature later this month. The announcement is the latest of a slow but steady trickle of similar news that hints at distress due to China’s slowing economy. Read Full Post…
A couple of headlines are underscoring the high risk that China’s financial sector could soon pose for both domestic and international investors, as the nation’s financiers look for the most creative but not necessarily the safest ways to raise money. In the first instance, China Merchants Bank (HKEx: 3968; Shanghai: 600036) has officially joined the nation’s big national banks in a move to Europe, choosing the free-wheeling Luxembourg market as its first destination. Meantime, media are reporting that yet another domestic Chinese financial product is about to default, joining a growing list of such distressed high-yield offerings. Read Full Post…
The list of Chinese companies defaulting on their bonds continues to grow, with word that timber firm China Forestry Holdings (HKEx: 930) has missed an interest payment as it tries to repurchase the notes. I’ll admit that one reason I’m focusing on this news is because of a recent conversation I had with a Chinese banker, who explained to me what happens behind-the-scenes when companies have difficulty making bond payments. That explanation shows why we haven’t seen too many bond defaults yet, despite constant media reports that China’s banks are struggling under mountains of unreported non-performing loans. Read Full Post…
One of China’s 2 major meltdowns in the solar panel sector has taken a big step forward with word that trading in shares of LDK (NYSE: LDK) has been suspended and the de-listing process formally begun as the company liquidates. Meantime, word of a missed interest payment by a building materials maker is sending the latest signal that China will let more companies in ailing sectors default on their debt rather than pay off their creditors. That’s an important signal for the solar sector, which relies heavily on such debt to finance its operations and where many smaller players are in danger of similar defaults. Read Full Post…
