Three directors resign at Suntech as cash flow concerns continue

Suntech Power Holdings yesterday announced that three company directors had resigned with immediate effect citing severe cash flow concerns and the company’s failure to implement a number of its proposed actions.

Susan Wang, Julian Worley and Zhizhong Qiu have departed their positions as directors of the stricken solar power company, highlighting a welter of concerns, which included: unclear prospects on securing new capital; the lack of a clear business plan; difficulties in completing consensual restructuring with convertible bondholders; loss of critical talent; failure to pay outside legal counsel; potential erosion of internal controls, and the impairment of employees’ ability to function properly.

In July, the scale of Suntech’s debts were revealed in a submission to the U.S. Securities and Exchange Commission (SEC). The Chinese manufacturer’s European unit – Switzerland-based Suntech Power International (SPI) – had creditor claims amounting to $192.7 million. Wuxi Suntech, the company’s principal manufacturing unit, went into insolvency this year after creditor claims reached $454.3 million.

Additionally, a subsidiary based in the British Virgin Islands – Power Solar Systems Co. Ltd. – has $324 million creditor claims. With other Suntech affiliates subject to an additional $23.8 million in claims, the company’s total debt last month stood at $994.8 million.

In an attempt to stave off the creditors, Suntech launched a fire sale of its solar panels, with Jiangsu-based vertically integrated manufacturer Shunfeng Photovoltaic International Ltd. purchasing a 29.7 MW solar project near the Mongolian border for an estimated 32% discount.

In light of Suntech’s ongoing troubles, industry analysts and Chinese media have reported that Trina Solar and Yingli Green Energy – manufacturers in the Chinese solar power industry – are considering a partial or complete acquisition of the company: a move that could have a major impact on the Chinese solar manufacturing landscape.

For now, Suntech will continue operations with a diminished board of directors. Its three remaining independent directors, Philip Fan, Michael Nacson and Kurt Metzger, have stated that the outgoing trio’s concerns were demonstrative of the disharmony between the executive management and the board – an erosion of communication that had drastically hindered top-level decision making.

The remaining three independent directors have stated that they see progress being made in response to the concerns raised by the three who resigned, and are confident that a smaller board containing recently appointed members will be able to function more effectively and efficiently.

The remaining directors have appointed Nacson as Chairman of the Board. Nacson will also sit as a member of the Audit Committee, Nominating Committee, Corporate Governance and Compensation Committee, alongside Fan.