LDK Solar Co. Ltd. (NYSE: LDK) is trying to reach an agreement with noteholders before a forbearance period is up at the end of October.
LDK, headquartered in Xinyu City, China, makes photovoltaic (PV) products, including polysilicon, monocrystalline and multicrystalline products for use in solar panels.
LDK missed a payment on its 10 percent senior notes due 2014 on Aug. 28, and the company’s forbearance agreement, announced Sept. 26, expires on Oct. 27. LDK says that it is hoping the forbearance agreement is the first step to achieving a consensual solution for obligations under the notes.
The company indicated doubt about continuing as a going concern, or without the threat of liquidation, due to high debt load, the company says in a filing with the U.S. Securities and Exchange Commission.
As of Dec. 31, 2012, LDK had a working capital deficit of $3.15 billion, which increased from the $2.1 billion deficit the company had Dec. 31, 2011. LDK had about $5.2 billion in total liabilities as of Dec. 31.
LDK listed $4.4 billion in assets for the quarter ended June 30, compared with $4.99 billion in assets for the quarter ended March 31, in SEC filings. LDK also listed $4.4 billion in total liabilities for the quarter ended June 30, compared with $4.9 billion in liabilities that it listed for the quarter ended March 31.
“Due to the current and on-going deteriorating PV market conditions and overall global economic slowdown, we have scaled back certain of our businesses,” the company says in a May 13 filing with the U.S. Securities and Exchange Commission. “The significant uncertainties regarding the sustainability of the PV market in the current macroeconomic environment are likely to continue to adversely impact demand for our products. In order to ramp up our production to levels consistent with expected demand and to position ourselves to regain profitability, in addition to refinancing or renewals of all of our outstanding short-term debt, we will need new external financing for our cash requirements.”
The company needs money to purchase materials, to improve production facilities, pay bills and buy new equipment.
LDK is working to restructure. The company has formed a liquidity plan, which it says it may not be able to successfully execute.
The company sold 25 million shares in July, raising $25.75 million. In February and March, the company sold about 17 million shares to Fulai Investment Ltd. for about $24.5 million.
LDK should benefit from China’s decision to give tax breaks to domestic solar companies, an announcement made Sept. 29.
The company hired Jefferies LLC as a financial adviser for strategic advice in connection with the notes. Sidley Austin is acting as LDK’s legal counsel. Ropes & Gray LLP is acting as counsel to the group of noteholders.
LDK joins many other solar panel companies that have struggled, including Envision Solar International Inc., which is on Mergers & Acquisitions’ Distressed Company Watch List, and Suntech Power Holdings Co. Ltd.’s (NYSE: STP) China-based subsidiary, Wuxi Suntech Power Holdings Co. Ltd., which was placed into bankruptcy by a Chinese court in March.
For last week’s edition of Turnaround Tuesday, see “Comarco’s Loss of Largest Customer Causes Doubts.”
For more struggling companies, see Mergers & Acquisitions’ Distressed Company Watch List.