Suntech announces bond default, financing search
Suntech, one of the world's biggest solar panel manufacturers, said Monday it had defaulted on a $541 million bond payment in the latest sign of the financial squeeze on the struggling global solar industry.
Suntech Power Holdings Ltd.'s announcement was a severe setback for a company lauded by China's communist government as a leader of efforts to make this country a center of the renewable energy industry. Its founder, Shi Zhengrong, became one of the industry's most prominent entrepreneurs and a billionaire, only to see most of his fortune evaporate as the company's share price plummeted.
The company is "exploring strategic alternatives with lenders and potential investors," David King, who replaced Shi as a CEO last year, said in a statement.
Suntech was due to make a $541 million bond payment on Friday but ran short of cash following heavy losses over the past year.
The company said it reached agreement with holders of 60 percent of the bonds to postpone payment but Monday's announcement said the bonds' trustee had declared a default. It said that triggered defaults on other debts to the International Finance Corp. and Chinese lenders.
China's solar producers have been battered by a glut of supply in the market brought on by their own government's efforts to promote the industry.
Lured by tax breaks and subsidies, hundreds of small Chinese producers piled into the industry and new arrivals were springing up as late as 2011, when weak demand and a glut of supply forced producers to slash prices.
Other major Chinese producers including Yingli Green Energy Ltd., LDK Solar Co. and Trina Solar Ltd. have reported heavy losses. That has prompted expectations the government will intervene and force companies to merge or shut down.
Prices of polysilicon wafers used to make solar cells plunged by 73 percent from 2010 to last year. The price of cells fell by 68 percent and that of modules by 57 percent.
Major manufacturers amassed debts of $17.5 billion, according to Maxim Group, a research firm in New York City.
Forbes magazine estimated Shi's fortune at $2.9 billion at its peak in 2008. It said last year that had tumbled to about $500 million as Suntech's share price plunged.