The Chinese manufacturer, whose balance sheet revealed a US$2.6 billion debt mountain at the end of 2012, raised $240 million from the sale of 18.46% of the shares in its LDK Silicon poly manufacturing unit to three Chinese lenders.
China Development Bank Capital Corporation Ltd, a wholly owned subsidiary of China Development Bank; Excel Rise Holdings Ltd. and Prosper East Ltd., investment affiliates of China Construction Bank Corporation; and Apollo Asia Investment Ltd, an investment fund affiliated with Bank of China Ltd, acquired the shares on the understanding the silicon unit would undergo an IPO within two years.
If LDK Solar fails to go through with the IPO in time, the lenders can demand redemption of the $240 million plus 23% interest for a total cash call of around $295 million.
LDK told the SEC in a May 13 filing that "LDK Silicon is not currently intending to complete a preferred initial public offering by June 3, 2013" as Monday’s deadline approaches.
A Bloomberg report on the filing stated that any such default on debt obligations could also trigger the accelerated payment of a $275 million bond issue due to mature in February 2014 and, with LDKs annual report indicating a cash-in-hand figure of just $98.3 million at the end of 2012, it appears the three Chinese LDK Silicon lenders have the power to trigger a collapse to mirror that which hit rival manufacturer Suntech earlier in the year.
Analysts expect the Chinese lenders to renegotiate the terms of the financing as the prospect of IPO-ing a polysilicon manufacturer with poly prices at all-time lows is far from appetizing.