China-based Trina Solar Ltd (天合光能) and JA Solar Holdings Co Ltd (晶澳太陽能) said they will be able to pay for their US bonds that mature in the next few months, days after rival Suntech Power Holdings Co Ltd (尚德電力) defaulted on US$541 million of its bonds.
Most Chinese solar companies piled on debt over the past two years to expand manufacturing operations, eventually leading to a glut that sent prices down sharply.
Suntech’s default and the subsequent insolvency proceedings for its main manufacturing unit have raised worries that US bondholders of Chinese companies may be left high and dry in case of defaults.
Such concerns are not unfounded as China’s bankruptcy laws give preference to domestic lenders.
“We are extremely cautious in the space ... and are uncomfortable with our legal standing in the event of default,” said James Dinsmore, a portfolio manager at Dinsmore Capital Management in Morristown, New Jersey.
The firm owns Trina bonds.
A Suntech bondholder, Trondheim Capital Partners LP, had said it would sue the company for the bond default.
However, executives at Trina and JA Solar said they have the cash to meet bond obligations in the US.
JA Solar has to pay US$123 million on its 4.5 percent convertible bonds that mature on May 15, while Trina Solar owes US$83.5 million on its 4 percent senior note due July 15, according to Thomson Reuters data.
“We are well prepared to pay off the convertible notes due in May,” JA Solar chief operating officer Xie Jian (謝健) said in an e-mail.
“Going forward, we’ll maintain our focus on stringent cash management and cost reduction, and we’ll continue to explore further financing options as appropriate,” Xie said.
The company, which has a market value of about US$151 million, had cash and equivalents of 3 billion yuan (US$482.8 million) as of Dec. 31.
Bigger rival Trina’s cash and equivalents and restricted cash was US$918.2 million, more than three times its market value.
“We have the option to pay from these cash balances, or examine one or more refinancing options which we have yet to announce,” spokesman Thomas Young said.
Dinsmore believes Trina would be able to meet the debt payment due in July.
LDK Solar Co Ltd (江西賽維), which has US$21 million due on April 15 on its 4.75 percent notes as per Thomson Reuters data, did not respond to calls and e-mails seeking comment on its imminent bond maturity.
The company said in December last year it was in talks with creditors regarding the terms of its offshore debt.
“The cash LDK is generating is not sufficient to support the debt loads they have,” said Patrick Chovanec, chief strategist at investment firm Silvercrest Asset Management in New York. “But there is the issue of how politically important it is to meet the offshore debt payment.”
The local government in Suntech’s home town of Wuxi is looking to bail out the solar panel maker, though a group of Chinese lenders want the company main unit declared insolvent.
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