"Abnormally low" share prices have prompted the New York Stock Exchange (NYSE) to delist former Chinese wafer heavyweights LDK Solar this week following a warning on Friday that the company’s status on the market was under review.
Having battled insolvency proceedings and filed a Cayman Islands liquidation application in recent months, LDK Solars delisting from the NYSE marks a new low for the company, and one which could prove terminal for any hopes it has of turning its fortunes around.
After tumbling for years, shares in LDK sunk to below $1 in February as the company struggled to adjust to a new global market order following the U.S.-led trade sanctions against China’s state-subsidized solar equipment. This week, 60% of LDK’s bondholders have agreed to a sizable "haircut" on the company’s defaulted bond, accepting $0.20 cents on the dollar for the Senior Notes, with an option tabled to convert the notes into shares valued at $1.58, although nothing to that effect has yet been confirmed by LDK Solar.
The introduction last year of tariffs of up to 250% on imports of Chinese solar panels punctured many companies’ bottom lines, and prompted Beijing to announce that it is ending the practice of "propping up" solar companies that operate at a loss. China is eager to reduce oversupply in the solar sector amid falling prices and ongoing economic woes that led last month to the historic default of Chaori Solar the first time ever that a Chinese company has defaulted on a domestic corporate bond.
Many Chinese solar companies still receive financial backing from state-run banks, but even this implicit support is proving incapable of shoring up a sector that is under considerable strain as prices continue to plunge.
Although China is forecast to install up to 14 GW of PV capacity this year, and is almost certain to lead the industry in terms of revenue throughout 2014, many of its companies are beginning to creak under the economic pressures of carrying the market, with some experts suggesting that Chaori Solar’s default could just be the first of many. Indeed, barely a week after Choari’s historic default, panel maker Baoding Tianwei Baobian Electrical had its shares suspended from the Shanghai Stock Exchange.