STP - Suntech Power

[nnayyar]

Thanks! Great find!

 

So is my understanding correct, the company has till today to respond to the Motion of Summary Judgement? It then goes to the Judge and he decides if the company is actually bankrupt? So just a question of how long it takes for judge to respond?

[LC]

Today's the deadline for Suntech to respond to the Trondheim lawsuit. Here's a letter from Suntech's lawyer asking for an extension from Jul 15 to Aug 15: http://www.scribd.com/doc/155798655/Endorsed-Letter-pl. The judge gave them until Aug 1 (handwritten at the bottom).

walt373, you must be a doctor as I can barely make out the date from that handwriting!  ;D

 

Would you mind translating the rest of what the judge wrote? Thanks in advance.

[walt373]

I'm no legal expert but from what I understand, Trondheim/Meixler are just suing to get their $550k principal plus accrued interest and legal costs, so if they win, the judge can order Suntech to pay up. If Suntech doesn't pay, then I'm not sure what happens, but I think Trondheim/Mexiler can start seizing Suntech property. They have an office in San Francisco and a plant in Arizona so there's probably enough US property to cover $550k. Suntech could voluntarily declare bankruptcy to avoid this but I don't think they can be forced into bankruptcy at this point. Don't know how long the judge will take to decide though.

 

I'm not exactly sure what the judge's chickenscratch says but I think it's "application granted something something. Defendant should something by 8/1/13. So ordered Robert P Patterson US something 7/10/13".

[nnayyar]

Was told that STP has filed a response but need access to PACER(?) to get it? Does anyone happen to have access?

[walt373]

http://www.scribd.com/doc/157717587/STP-2013-08-01-Document-10

 

Their argument is that they are currently trying to reach a resolution with all bondholders, and this lawsuit could interfere or even jeopardize that process. Plus it would result in unfair preferential treatment for Trondheim/Meixler over the other bondholders.

[APG12]

This looks like a home run to me but we should be aware that if the stock stops trading or is canceled, the puts will be worthless. Does anyone have experience with bankrupt equities? I know most register to trade OTC post filing but I'm not sure if that's required of them or voluntary. I wonder what the risk is that the stock continues to trade well above 0 until it's canceled.

[nnayyar]

 

 

http://mobile.reuters.com/article/idUSL4N0G70DX20130806?feedType=RSS&irpc=43

 

    The source said that creditors of Wuxi Suntech were expected to take a "haircut" - or suffer losses - while the strategic investor, when chosen, was expected to inject capital into the company. He did not elaborate.

 

 

    The restructuring of Suntech's domestic debt is being closely watched by overseas creditors, whom analysts say are expected to recover a fraction of their capital at best.

[abitofvalue]

This looks like a home run to me but we should be aware that if the stock stops trading or is canceled, the puts will be worthless. Does anyone have experience with bankrupt equities? I know most register to trade OTC post filing but I'm not sure if that's required of them or voluntary. I wonder what the risk is that the stock continues to trade well above 0 until it's canceled.

 

this is true. one reason to be careful in buying puts or trying to play this through options.

[walt373]

In Suntech's 6/28 press release, they listed three things they hoped to accomplish:

 

1. "The Bondholders will nominate two additional members to the Company's Board of Directors who will provide guidance and assist in the Company's ongoing restructuring efforts."

 

2. "The Company and the Bondholders will also work together to identify strategic and financial investors to bring in new capital to Suntech."

 

3. "The new agreement contemplates an equitization of all major debt claims held by the Bondholders... In the coming weeks, the Bondholders and the Company will work toward a framework agreement regarding the specific terms of a debt restructuring and equitization."

 

Item 1 was done last week. The Reuters report indicates Item 2 is coming along. So it looks like the plan is going as expected and the last step is equitization.

[LC]

what would all that debt being converted the equity do for the share price...it's trading at 1.38. my thinking is do all these bondholders want to sit on millions of shares at pennies apiece?

[walt373]

I think it would crush the share price, probably even more than actually declaring bankruptcy would. With the bonds trading at 26 cents on the dollar, the market value is around $140 mil. STP has about 181 mil shares. If the shares get diluted by say 95%, increasing share count to 3.62 bil, that means bondholders can break even if they sell their converted shares for a little under 4 cents. If they can sell their shares for say, 10 cents, that's a 160% profit... I think a lot of bondholders would take that profit. If they can sell for 15 cents, that's equivalent to bonds at par. Again, all of this is assuming 95% dilution. If it's like 99%, forget about it. Maybe do a reverse split as well and hope for a nice price pop like what happened with USU.

[ItsAValueTrap]

This looks like a home run to me but we should be aware that if the stock stops trading or is canceled, the puts will be worthless.

They will not be worthless.

 

If the stock stops trading, then you will have to exercise put options manually.  It's possible that you won't be allowed to exercise the puts unless you own STP shares (and you aren't allowed to borrow them because the stock is halted).  So, you will have to buy shares in the private market.  That's a manual process and there will be fees involved.

 

2- If the future will be anything like the past... the stock probably won't be halted (for an extended period of time) unless the exchange halts the stock because there might be fraud involved.  Bankruptcy will not cause the stock to be halted.

[walt373]

An anonymous commenter on Credit Bubble Stocks provided some new info: http://www.blogger.com/comment.g?blogID=1527840491496268397&postID=619437386387942643.

 

I think it's from a Chinese news article: http://www.yicai.com/news/2013/08/2925297.html

[walt373]

A press release came out saying a bunch of directors quit, citing the following:

 

Severe cash flow drain with unclear prospect of securing new capital;

Difficult prospects on completing consensual restructuring with convertible bondholders;

Lack of clear business plan;

Loss of critical talent and potential severe HR retention issues;

Failure to pay outside legal counsel;

Potential erosion of internal controls; and

Impairment of employees' ability to function effectively.

 

http://ir.suntech-power.com/phoenix.zhtml?c=192654&p=irol-newsArticle&ID=1850167&highlight=

[APG12]

Tomorrow is the deadline for the company to come to a voluntary agreement with debt holders. We may see another extension but, seriously, who the hell is purchasing this stock the day before the company could announce massive equity dilution?? I just don't get it. I haven't seen a single piece of evidence in favor of the equity retaining any value. Yet someone is buying!

[Hielko]

You could make some good money simply by lending out your shares. And I bet that we'll see yet another extension. I doubt that they can just do a debt for equity swap without prior communication. They need debt holders to agree and they probably need shareholder permission as well. No easy solutions here for the company.

[APG12]

Hey Hielko,

 

The question I have is, why was the company silent today? Bondholder negotiations are not simple and I would have assumed that the company would know at least a day or two in advance whether the deadline would be extended. The fact that they haven't released anything is not a positive sign. Think of all of the incentives for the company to announce the deadline extension ASAP.

[Hielko]

And what are bond holders exactly going to do? The most important assets are in China with billions of Chinese bank debt that has seniority. It's not like they can put the company in bankruptcy proceedings and grab the assets. No quick catalyst here imo, even though I think the equity is a zero (I'm short STP).

[Josh4580]

Suntech Announces Developments in Restructuring Process

 

http://finance.yahoo.com/news/suntech-announces-developments-restructuring-process-034800603.html

[LC]

Suntech Announces Developments in Restructuring Process

 

http://finance.yahoo.com/news/suntech-announces-developments-restructuring-process-034800603.html

Below is the official release uploaded to EDGAR on 9/3/13: (emphasis mine)

 

 

WUXI, China — August 30, 2013 — Suntech Power Holdings Co., Ltd. (NYSE: STP) (“Suntech” or the “Company”), one of the world’s largest solar companies, today announced that following productive discussions with its key stakeholders earlier this week in China, an understanding has been reached with its Creditor Working Group led by Clearwater Capital Partners and Spinnaker Capital Limited for restructuring the Company.

 

The Company intends to immediately commence preparations for implementing a recapitalization plan that contemplates a scheme of arrangement as part of a holistic restructuring of the Suntech Group. The principal components of the restructuring scheme would include: (i) identifying the key assets to be retained by the Company to allow it to continue its operations at a rationalized scale; (ii) the exchange of outstanding debt into the Company’s equity; (iii) the setting of maximum debt levels for the Company’s operating subsidiaries; and (iv) the introduction of a new strategic investor that will provide the necessary funding through the purchase of newly issued equity to complete the restructuring process. This will permit the Company to substantially improve its balance sheet and to be well positioned to continue as a major worldwide supplier in the solar industry.

 

The Company anticipates entering into a restructuring framework agreement in the next week or so to document the understanding that will allow the Company adequate time to execute the restructuring so long as it progresses the recapitalization plan and complies with the other terms in the restructuring framework agreement.

 

Mr. Zhou Weiping, Suntech’s President said, “Important steps forward are being taken towards a new Suntech. During this restructuring period, Suntech has continued to maintain its production and warranty obligations. The restructuring will allow us to cut our costs and optimize our margins and production. Although there is expected to be substantial dilution for our existing shareholders, we believe that these measures will put us in a better and stronger position to serve our current and future customers in China, Japan, the EU, USA and around the world.”

 

As noted in prior announcements, the Board of Directors has recently been reconstituted to a smaller, more geographically focused Board with the skillsets necessary for the development and execution of a restructuring plan. Recent new director appointments are: Mr. Michael Nacson, the new Chairman, who has been based in Southeast Asia for more than 30 years and has extensive restructuring experience, including projects in Hong Kong, China and North America, with a focus on the manufacturing, technology and electronics sectors; and Mr. Kurt Metzger who has lived in Asia for 18 years and has significant experience relating to risk management/debt restructuring, particularly in the sustainable energy sector. Mr. Nacson and Mr. Metzger were nominated by the Creditor Working Group. The Company and the Creditor Working Group will also be working together to identify a full-time executive to assist in the restructuring process and to work with the current management team to rebuild the Company to its former prominent position in the solar industry.

 

Suntech’s Chairman, Mr. Michael Nacson said, “We are pleased that we have been able to make progress on discussions with key stakeholders involved that puts us on a good footing to move forward with a clear business plan.”

[APG12]

Yup, nothing to really say about that LC. The strangest part of this investment idea is how little value there is to add to the thesis beyond reading the announcements. They're literally telling people, we're going to dilute the hell out of you. No analysis necessary.

[LC]

Yup, nothing to really say about that LC. The strangest part of this investment idea is how little value there is to add to the thesis beyond reading the announcements. They're literally telling people, we're going to dilute the hell out of you. No analysis necessary.

You're right. It's actually a bit disconcerting. Is Mr. Market simply totally off on this, or is there some side-dealing afoot that the public is unaware of? Usually when I value a company and there is  HUGE discrepancy between my valuation and the market's, it is a sign that I've missed something and I tend to stay away...

 

This would normally fall under those circumstances, but because there is a clear catalyst and because I am making a leveraged bet via options and the amount is not even 1% of my portfolio...

 

I liken the situation to the state lottery commission releasing a statement saying, "one day during the next 6 months the lotto numbers will be 123-456". So while it seems strange, and maybe you can't trust the information, the risk vs. reward is so well defined that you would play those numbers every day for 6 months. If you lose, you're out maybe $180 , but if you win, you win big.

[walt373]

Something similar happened to YRCW back in 2011, when they diluted their shares. The terms were known for months but then when the dilution actually took place the stock price tanked 85% in one day.

[danconia17]

has anyone heard how the Trondheim case went today?  if they won, i suspect that might accelerate the timeline since they could start seizing assets in the US, etc...

 

thanks

[T-bone1]

I think they got summary judgement in their favor . . . Time to start seizing assets I guess