Yingli reveals the full extent of its huge debt mountain

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Chinese module manufacturer Yingli has warned it faces being broken up entirely to satisfy creditors who have already lodged numerous lawsuits against its debt-laden businesses.

The annual accounts filing lodged today with the U.S. Securities and Exchange Commission spells out the full horror of Yingli’s balance sheet and is a 200-plus page litany of unpaid debts, angry creditors, ever mounting losses and even links to sanctions-busting entities in Syria, Iran and Sudan.

To give just a taste of today’s Form 20-F filing – lodged by a company delisted from the New York Stock Exchange in July – the firm’s Baoding Tianwei Yingli New Energy Resources Co Ltd manufacturing subsidiary is nursing overdue medium term notes worth RMB2.23 billion ($331 million) and RMB2.27 billion.

Parent Yingli Green Energy Holding Company Ltd posted losses of RMB2.1 billion in 2016 and RMB3.5 billion in 2017 and although that figure came in to RMB1.7 billion last year, the company announced it has a whopping RMB11.9 billion working capital deficit. The group has overdue short term borrowings of RMB1.1 billion and RMB3.67 billion and further short term loans worth RMB8 billion will fall due for repayment within 12 months.

The latest overdue debts

On top of that, Yingli admits it has been unable to roll over settlement of a further RMB2.39 billion that fell due last month and this. Small wonder that today’s statement warns “we may not be able to work out a viable debt restructuring plan”.

The group has managed to fend off a break-up to date by negotiating with its largely Chinese lenders but patience may be running short, as the lengthy list of court cases the company is facing illustrates. Three creditors have successfully persuaded the courts they should be repaid figures of RMB74.4 million, RMB76 million and RMB318 million, a further claim – for RMB110 million – is being disputed and a new case, suing for RMB106 million, has now been received by the company.

Yingli, whose dire cashflow situation has forced it to partially shutter its production capacity, warned in the filing it could have all its businesses broken up to satisfy creditors and added, holders of its ordinary and ADS shares could be left empty handed.

The sanctions issue has arisen as a result of China South acquiring the Tianwei Group of which the Tianwei Yingli subsidiary is part. China South, and particularly affiliate company Norinco, have been accused of operating in Syria, Iran and Sudan in defiance of sanctions and the Tianwei acquisition means the offending entities are now affiliates of Tianwei Yingli.

Where did it all go wrong?

The section devoted to explaining how things came to such a disastrous state of affairs is baffling, harking back as it does to the global financial hangover experienced after the 2008 financial crash, a situation endured by several of Yingli’s peers without bringing them to the brink of ruin. Seasonal variations in global PV demand also appear to be an attempt to clutch at straws with “holidays” listed alongside bad weather as a reason for poor trading figures.

The unpredictable nature of public solar subsidies around the world is another example of a headache the rest of the PV world considers business as usual and the description of plummeting panel prices seems a more likely explanation, if only partial, of Yingli’s woes.

Where Yingli goes from here is anybody’s guess. Chinese lenders, particularly state-backed ones, can show extraordinary patience with domestic businesses but the Baoding-based manufacturer last year saw revenue almost halve, from RMB8.36 billion in 2017 to RMB4.46 billion. There was no gross profit margin, the 3.6% seen in 2017 becoming a 6.2% loss on every product.

With figures like that, and Yingli apparently having to fight corporate fires left, right and center, it is hard to envisage creditors being kept at bay for much longer.