Suntech Liquidating

Suntech which is the largest solar bankruptcy case in China is slowly shutting down. After its main operating subsidiary Wuxi Suntech was declared insolvent, there was little hope of survival for the main listed company in the USA. Now the Caymans holding company is also going through liquidation proceedings and it is likely to declare Chapter 15 in the USA. The company has got a huge amount of debt which it is unlikely to pay off, given that it only managed to sell its Wuxi assets for less than $500 million compared to its more than $2 billion in debt.

There is speculation that there will be a debt to equity swap, but even that may not be too useful given that there is little in terms of operational assets left with the Cayman company. The debt holders would take a huge chunk of the equity and even then they would have gotten very little as I am not sure what kind of business model Suntech will have left.

Suntech is the only big bankruptcy of a Chinese company that is playing out. I think LDK Solar will also follow soon given the company’s massive debt load which cannot be repaid. There is little chance that US ADR holders will get anything and so the $100 million market cap is a bit surprising. There has been a huge surge in solar stock prices mainly due to improvement in solar industry dynamics. The industry seems to be returning to a more even keel and many solar companies have returned to the black after a torrid two years of massive losses. The current level of solar panel prices also seems to be sustainable in generating lots of demand. Even as subsidies have collapsed in Europe; Japan and China have taken up the slack. The good thing is that subsidy levels do not have to be very high in order to make solar energy feasible.

Read more about the Suntech Bankruptcy here:

Suntech’s Stock up – Myths & Reality