China Singyes Solar Technologies Holdings, whose shares fell as much as 72 per cent in Hong Kong last week after a three-month trading suspension, is in talks with at least three potential buyers for its assets.
The Zhuhai, Guangdong-based solar farm operator had defaulted on a one-year, US$160 million offshore bond in October and is in danger of defaulting on another two-year, US$260 million offshore bond due next month.
“Since news of our default broke, many potential buyers have knocked on our doors,” controlling shareholder and chairman Liu Hongwei told investors via teleconference on Friday.
“We have inked non-binding [memorandum of ] understandings with at least three of the financially stronger ones on potential solar farms’ sale.”
The would-be buyers will need one to two months to conduct due diligence on the assets and submit bids, he said, adding Singyes had received an indicative bid of 7 yuan per watt from a potential bidder in Guangdong province.
The company has a combined generating capacity of 467.8 megawatts (MW).
At 7 yuan per watt, they could potentially be worth 3.27 billion yuan (US$485 million).
The company, which had 6.1 billion yuan of outstanding debt at the end of June, sank into a liquidity crisis three months ago when it failed to raise funds to repay the US$160 million bond.
A week before the bond was due, it failed to sell a two-year HK$230 million (US$29.3 million) convertible bond offering 12 per cent interest.
This also forced Singyes to withdraw a planned new share sale and bond issue.
It also has another 930 million yuan convertible bond due in August this year.
By issuing two major short-term bonds within a year to fund its business activities, Singyes was exposed to significant refinancing risks, especially after Beijing pursued policies to deleverage the economy, which saw banks tighten credit to high-risk customers.
The solar farms development sector that Singyes operates in is particularly vulnerable, as many companies had aggressively pursued projects in the past few years to take advantage of Beijing’s generous subsidies.
But major delays to subsidy payments by the government and soaring debt repayment burdens have forced developers that have overstretched their balance sheets to try and offload solar farms.
“Default risk is likely to remain elevated for other solar farm operators unless there is a shift towards more supportive government policy, an improvement in funding conditions, or significant progress on asset sales,” said Yu Wei, Fitch’s Shanghai-based associate director, in a note earlier this month. “Companies with large upcoming bond maturities are the most vulnerable.”
Moody’s associate managing director Ivan Chung, said in a note this month that while Beijing will continue to launch supportive measures to facilitate refinancing, credit had not flowed to weak debt issuers, such as highly leveraged firms that relied heavily on shadow bank finance, which explained the continued bond defaults in the onshore bond market in recent months.
“It also indicated regulators’ tolerance of isolated default cases that do not trigger systemic risks,” he added.
Singyes’ Liu said its onshore and offshore lenders have not sought court orders to freeze its solar farm assets, adding the vast majority of its buildings curtain wall business operates “normally”.
Through its advisers, it is in talks with its creditors, bondholders and potential white knight, Shandong provincial government-owned Shuifa Energy, to come up with a workable debt restructuring deal to avert bankruptcy or liquidation.
Its shares on Friday closed at 99 HK cents, 54 per cent lower than the last closing price before trading resumed on Wednesday.