Suntech Power Is Back… Sort Of

Suntech Power (NASDAQOTH: STPFQ  ) is still alive after all. The U.S. traded stock was never really gone; it had just defaulted on loans and gone dark to investors, not updating earnings or progress in restructuring.

Late on Friday the company said it has reached an agreement with its Creditor Working Group that "contemplates a scheme of arrangements as part of a holistic restructuring." In short, no actual deal has been reached but debt holders have preliminarily agreed to exchange debt for equity in a new slimmed down Suntech. Some non-core assets may be sold in the process and the group will decide what debt level will be reasonable for operations to support.  

For stockholders, we know there's dilution coming; we just don't know how bad it will be. According to Friday's announcement a final deal will be reached in "the next week or so."

Is there any business left?
It's possible that Suntech could remain a big player in the solar industry but a lot of damage has been done to the company's reputation and its core business. We've never seen a company go through bankruptcy -- which is essentially what Suntech did even though the parent company never filed for bankruptcy -- and emerge as a dominant player in solar so this is uncharted territory.

Suntech's saga is also a warning sign for Chinese competitors who are building up huge debt loads. Yingli Green Energy (NYSE: YGE  ) and LDK Solar (NASDAQOTH: LDKSY  ) are the two companies that I think are headed for a similar fate of defaulting on outstanding loans, something LDK has already done on a small scale. Each has over $2 billion in debt, mostly funded by Chinese state-run banks. The Suntech solution shows that bailouts won't last forever and even China's state-run banks are willing to effectively take a company into bankruptcy and dilute existing shareholders. At the end of the day, those speculating that easy money will last forever for solar manufacturers may end up with little or nothing when debt collectors come calling.

An energy stock worth buying
Suntech is definitely not a buy in solar but there are energy stocks that investors can buy without worry of restructuring or bankruptcy. To get the name and detailed analysis of a top energy company that will prosper for years to come, check out the special free report: "
The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2619566, ~/Articles/ArticleHandler.aspx, 10/1/2014 6:44:42 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement