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Chinese Solar Companies keep on raising debt despite horrible Capital Structures

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Chinese solar companies are finding it increasingly difficult to borrow money even from their home banks. This is due to the massive overcapacity in the industry which has led to continued losses even for the lowest cost manufacturers. Jinko Solar (JKS) has been one of the best performers in the Chinese solar sector in 2012. The company has now got a green signal from NDRC (highest economic policy making body in China) to issue bonds worth $128 million for working capital and capex.

Note this is nothing new as other big Chinese solar majors like LDK Solar too have been allowed to raise money through bonds. LDK was and is a basket case and its bonds are trading for cents to the dollar. However they were subscribed by Chinese banks at a high premium, to the prevailing market price of LDK debt trading in Singapore. Recently local Chinese government bailed out a Shanghai listed Chinese solar company Chaori Solar, after it had no money to repay its maturing bonds. Jinko Solar has managed to raise the bonds at the annual bond rate of 9%, which is a surprise considering the huge stress under which the company balance sheets are. We think that companies like Suntech and LDK are bankrupt and would have zero book value if their assets were marked to the market. The Chinese government is responsible for keeping the solar industry in a distressed state, as they are not allowing the excess capacity in the industry to die out naturally.

Recently there was news of the first ever country’s bond default by Chaori Solar. The Chinese Government has intervened once again asking Chaori Solar’s bank for deferment of their claims on the loan. The amount is expected to be approximately USD 61 million. The company has now agreed to make the interest payment in time. Constant intervention by the Chinese local governments are not allowing the bankrupt solar companies to go belly up.

LDK Solar got a $80 million grant from its home city Xinyu to make a loan repayment. LDK which was making massive losses and has a humongous debt, was acquiring distressed European solar companies as recently as January of 2012. LDK convertibles at that point of time were trading at 50 cents to the dollar, indicating the lack of investor confidence in the company. LDK since then has fallen by around 50% more.


Tier 1 module manufacturer, JinkoSolar has successfully placed a RMB800 million (US$128 million) in bonds after approval from the by the Chinese National Development and Reform Commission’s (NDRC) Financial Division.JinkoSolar said that the proceeds from the bonds would be used for capital expenditure and working capital purposes.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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