Bottom line: Yingli looks set to receive a government bailout from Beijing.
Beijing is telling one of the nation’s biggest policy lenders to provide money for struggling solar panel maker Yingli (NYSE: YGE) before it defaults on a bond payment due next month.
Last week Yingli said it was in desperate negotiations with 2 groups of creditors, including one holding 1.4 billion yuan ($220 million) worth of bonds set to mature next month. (previous post) The other group is owed another 1 billion yuan related to an Yingli bond that came due last year, meaning Yingli needs to find a total 2.4 billion yuan in new money before next month to avoid a massive default.
I previously said the wording in Yingli’s statement implied it was negotiating for a broader government rescue, and now the latest media report from Reuters is saying such a rescue loan could be coming soon. The report says China’s banking regulator has asked China Development Bank to guarantee 7.5 billion yuan in loans to Yingli to pay off debts and engineer a broader company reorganization. (English article)
Such a sum does look like enough to pay off all of the short-term creditors and also conduct a major overhaul of the company, which is currently losing massive money. While that might look good for Yingli, it looks far less positive for China Development Bank, which could easily lose billions of yuan if Yingli ultimately fails to repay this big new loan. But then again, Yingli’s rise was largely fueled by government subsidies, so now it’s not that surprising to see the government stepping in to prop up the company one more time.
Doug Young has lived and worked in China for 20 years, much of that as a journalist, writing about publicly listed Chinese companies. He currently lives in Shanghai where, in addition to his role as editor of Young’s China Business Blog, he teaches financial journalism at Fudan University, one of China’s top journalism programs.. 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.