LDK Solar Gets Portion of Debts Paid by China’s Xinyu Government

LDK Solar Co., the solar-wafer maker that’s reported four straight quarterly losses, will have a portion of its debts paid by the government of the eastern Chinese city of Xinyu, where it’s based.

The Xinyu authorities will include repayment of LDK’s loans from Huarong International Trust Co. in the annual fiscal budget, according to a statement on the website of the National People’s Congress, the nation’s top legislative body. The local legislature has approved the plan, the statement showed, without saying how much the city would pay.

The bailout is the first from a Chinese local government to a non-state solar company to pay off debt. The solar industry is grappling with a global supply glut that’s curbed prices and trimmed profit margins, hurting the ability of developers to pay off borrowings. LDK’s long-term unsecured loans from the Huarong Trust totaled $79.4 million at the end of 2011, LDK said May 15.

“From a solar-sector point of view, this is clearly negative” because it suggests that consolidation and price recovery will take longer than expected, Charles Yonts, an analyst at CLSA Ltd. in Hong Kong, said by e-mail.

Chinese solar-module prices sank to a record 77 cents a watt as of July 2, tumbling 47 percent from a year earlier, according to data from Bloomberg New Energy Finance.

Quarterly Loss

LDK, the world’s biggest maker of solar wafers after GCL- Poly Energy Holdings Ltd., said in May it may be unable to remain in business if it can’t improve access to funds. The company announced a first-quarter net loss of $185.2 million on June 26.

Its percentage of net debt to equity rose to 600 percent in the period from 406 percent in the prior quarter, resulting in “a meaningful risk for LDK and likely limiting its ability to raise more debt,” Nomura Holdings Inc. wrote in a report the same day.

A call to Li Longji, a spokesman for LDK, went unanswered.

LDK has “limited options and limited time” to ease liquidity pressure, Stephen Zhang and Yang Cheng, Beijing-based analysts at China International Capital Corp., said in a June 27 report. Strategic investors, possibly from state-owned enterprises, may be the company’s last chance, they said.


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