LDK Solar's Chinese subsidiaries forced into restructuring by Xinyu City

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When the president and CEO of a heavily indebted, major Chinese manufacturer steps down for “personal reasons”, you can be assured that something serious is coming.

pv magazine reported earlier this week on the resignation of President and CEO Xingxue Tong. At the time Bloomberg New Energy Finance Head of Solar Analysis Jenny Chase suggested that this could be an indication that the Xinyu Government would take a stronger role in the company’s restructuring.

It turns out that this may be a bigger role than we might have thought at first. On November 17, Xinyu courts accepted the application by four state-run corporations in Xinyu City and began bankruptcy proceedings for four LDK Solar onshore subsidiaries. The specific issue is US$44 million in loans and project fees, as well as another $8 million in electricity charges.

LDK Solar exited bankruptcy proceedings in the United States in February, and completing a restructuring of its offshore liabilities in April following missed bond payments from 2014.

However, these offshore proceedings had not affected LDK’s Chinese polysilicon, wafer and module production, which exist under separate subsidiaries. Bankruptcy proceedings for these subsidiaries marks a turning point for the company, which was already undergoing an internal restructuring.

The first creditors meetings will be held on March 1, 2016. New LDK President and CEO Zhibin Liu called the proceedings “inevitable” and pledged cooperation, in an unusually strongly-worded statement.

“As far as the LDK Solar management is concerned, we continue to be determined to work hard in the current and forthcoming economic environment, to meet our challenges ahead in our onshore restructuring, and to build our company up into a reputable player in the photovoltaic industry,” declared President and CEO Liu.

“In this regard, we appreciate the continued support of our wide-ranging stakeholders during our tortuous restructuring and rebuilding process.”

LDK left the has not produced quarterly financial reports for many quarters, and was de-listed from the New York Stock Exchange in April 2014. The company’s most recent annual financial report shows losses of $267 million in 2014, which is a tremendous improvement from the previous three years. In this report LDK reported $2.3 billion in liabilities in excess of assets.

The restructuring also comes at a time when a looming shortage of multicrystalline wafers could improve the fortunes of wafer makers like LDK. However, prices for polysilicon are at an all-time low, which bodes ill for LDK’s polysilicon division.