Suntech gets forbearance till May for 60% of convertibles due 2013

By Susanna Moon

Chicago, March 11 - Suntech Power Holdings Co., Ltd. said it signed a forbearance agreement with the holders of more than 60% of its 3% convertible notes.

Under the agreement, if the company fails to make payments due under the notes on March 15, the signing bondholders agree not to exercise their rights under the notes and the related indenture until May 15, subject to market-standard early termination events, according to a company press release.

The forbearance agreement will allow the company to continue to work with holders with a view to achieving a consensual restructuring, the release noted.

"The forbearance agreement demonstrates bondholders' support for Suntech and provides an excellent platform to further discussions towards a mutually agreeable restructuring of the notes," David King, Suntech's chief executive officer, said in the release.

"We are making progress and are working to find a resolution soon. At the same time, we are continuing our cost and operational review to further improve our efficiency."

Potential restructuring

Suntech said on Nov. 14 that it could restructure its convertible notes due 2013, conduct an exchange offer for them or enter into a strategic investment in connection with either an exchange or restructuring as a way to enhance the company's capital structure, as previously noted.

The company listed its capital structure objectives and alternatives in its presentation to bondholders. According to a previous filing with the Securities and Exchange Commission, the company's capital structure objectives are to

• Set annual goals for debt level reduction;

• Address 2013 convertible bond maturity;

• Reduce overall debt levels;

• Preserve cash to ensure the business has the liquidity needed to operate and restructure; and

• Ensure customer confidence in the company's balance sheet.

The company considered other alternatives to enhance its capital structure, such as a domestic loan, but the company said that although loans may be available to refinance existing bank debt as it matures, credit support to repay offshore debt is not available.

Suntech also considered a domestic bond offering but felt it could not successfully market the bonds at this time.

The final alternative considered was an asset sale, but due to current litigation, GSF was not saleable until the litigation is resolved. Suntech also said it has no other non-core assets sizable enough to generate significant proceeds and believed there was limited interest from buyers in its manufacturing capacity.

Suntech is a global manufacturer and distributor of solar panels. Its headquarters are in Wuxi, China.

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