Shunfeng prepares to sell golden goose to keep creditors at bay

Chinese solar developer Shunfeng has updated shareholders on its latest grapples with creditors in an annual report very much focused on debts.

The solar project company and LED manufacturer, which sold off its solar manufacturing operation in 2019, published figures which showed solar electricity sales revenue in China fell 34% last year, compared to the volume generated in 2019. That is not surprising given Shunfeng sold off 17 solar project companies in two deals last year.

That fall off in clean energy income dragged down the figures to a net loss of RMB502 million (US$76.4 million) last year despite a 55% leap in LED-related revenue over the same period. That loss is significantly less than the RMB1.88 billion (US$286 million) shed in 2019 but with Shunfeng preparing to sell off that profitable Lattice Power LED unit, it appears there could be further tough times ahead.

Goodwill

In the meantime, the board admitted it is dependent on the goodwill of creditors in relation to RMB500 million of overdue debts. Shunfeng is hoping its inherently vague plans to sell off further solar farms will be enough to satisfy the holders of a 2015 corporate bond which matured in November 2019 and which are awaiting payments of RMB417 million. The same goes for other lenders who are owed RMB83 million (US$12.6 million).

And there are other pressing concerns, with Shunfeng due to have made its first quarterly payment of HK$75 million (US$9.65 million) to China Minsheng Banking Corp yesterday as part of a deal to make payments of that amount every three months this year and next before settling a final HK$180 million by December 18, 2023. That debt renegotiation involved Shunfeng pledging its 20% stake in Shunfeng Photovoltaic Holdings Ltd as security.

The holder of a 2016 corporate bond which matured in June 2018 has been persuaded to hold off settlement of the RMB298 million owed, but only for 24 days from today, and the company must also find HK$87.5 million for its first payment to a bondholder owed HK$350 million by the end of next month. The same amount will then have to be handed over by November 30, and then May 31 and November 30 next year, after Shunfeng worked out a deal on Friday.

The company reported it also hopes to announce a new repayment plan this month for the overdue RMB666 million (US$101 million) it owes Chongqing International Trust Co Ltd.

Those creditor negotiations were helped along by the fire sale of 17 solar projects last year although auditor BDO has put a fly in the ointment in the annual report, by being unable to confirm the carrying value of the 11 project companies sold in the largest of the two transactions.

“The management of the 11 target companies,” said BDO, “denied the group's [Shunfeng's] directors, and our, access to the books and records and other information of the 11 target companies.”