JA Solar and Renesola Rush to Reassure Creditors

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Doug Young

Mid-sized solar panel makers JA Solar (Nasdaq: JASO) and ReneSola (NYSE: SOL) are both in the news today discussing their finances, in what looks like an attempt to calm the nerves of investors and creditors who are no doubt worried following the bankruptcy forced upon former industry leader Suntech (NYSE: STP) earlier this week. All of these companies have billions of dollars in debt which they used to build up their manufacturing operations over the last decade, and big amounts of that money will be due for repayment in the next 2 years.

Meantime, the fate of Suntech itself remains cloudy because the process is happening in an Chinese courtroom where local government officials wield big influence; but Chinese media are giving some indication of how things might proceed, with the government in the company’s hometown of Wuxi looking like it will play a major role in the coming reorganization.

Let’s start off with the news from JA Solar and ReneSola, which, like everyone else, are both losing money and struggling under big piles of debt accumulated during China’s solar panel build-up. Chinese media are quoting a JA Solar official saying the company has already prepared sufficient funds to repay $120 million worth of its bonds that will come due in May.

The reports cite CEO Xie Jian saying the company’s bonds “don’t have default risks”, although those words didn’t stop the price of the company’s bonds from falling. Its publicly traded shares also fell 3.5 percent in New York, and are down 9 percent this week.

Meantime, ReneSola has put out its own statement announcing a new credit line from policy lender China Development Bank worth 320 million yuan, or about $51 million. (company announcement) The announcement doesn’t say much, though the company says its ability to secure new funds in such a tough environment underscores ReneSola’s relatively strong financial position.

I don’t want to be too cynical, but it does seem like someone needs to point out that China Development Bank is hardly a traditional commercial bank, and I seriously doubt ReneSola could have gotten similar funds from any real commercial lender. People who have followed the current crisis will know that China Development Bank has been mentioned on numerous occasions as Beijing’s most likely financial vehicle for a broader industry bailout that could come later this year. This latest news would seem to indicate the bank will help Chinese solar panel makers to keep operating by providing necessary funds until the broader restructuring plan is implemented.

Lastly, let’s take a look at the latest report on Suntech in the China Daily, whose headline on the saga cites analysts saying the decision to declare bankruptcy was a “wise move”. Since the China Daily is an unofficial spokespaper of Beijing, it’s probably safe to assume that government officials in both Beijing and Wuxi agree with this characterization of the bankruptcy declaration, which was forced on Suntech by its creditor banks.

The report, which largely cites unnamed industry insiders, says there is a good possibility that the Wuxi government will take over Suntech’s debt, which includes more than $1 billion owed to 9 Chinese commercial banks. The report also indicates that newly named Suntech director Zhou Weiping, who has strong ties to the financial industry, may play an important role in the reorganization. It indicates that Suntech founder Shi Zhengrong may assist in the coming reorganization, but is unlikely to stay around after that. All of these moves look designed to calm investor worries as government entities keep the sector alive until a broader industry reorganization plan is announced.

Bottom line: New comments from JA Solar and ReneSola are aimed at easing default concerns among their creditors, with Beijing likely to continue funding the sector before a broader reorganization.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.


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