How Should You Trade Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP)?
Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), the Chinese solar Photovoltaic maker has been in the doldrums for such a long time that now any news will be good news. On Wednesday, the company said that an investment group has sent it a letter of intent of $150M to support restructuring and rehabilitation of the company’s operational and financial affairs.
Wuxi Guolian Development Co is the investment group that has come up with this decision. It is an asset-management company that the local Wuxi government has set up. A major part of Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP)’s operations are based in Wuxi. This city now seemingly wants to keep the company’s operations alive and ticking. This helps in two distinct ways- the company provides direct jobs in the region and also has an indirect impact on the economy in there. To a certain extent, this support will help in keeping both these factors stable.
But the stare-in-the-face fact is that the $150m that has been committed by the investment company will not suffice to bring the derailed Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) train on track. Non-Chinese creditors of the PV company have filed claims for $600M against its parent based in the U.S. In addition, the company also owes around $2.3B in loans to Chinese banks.
In September, a Chinese court postpones a ruling on Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP)’s restructuring-plan to 2013-end. This might well prove to be a landmark judgment that will set the benchmark for what treatment drowning China-based, U.S listed companies will receive, under the Chinese bankruptcy law.
The change that might happen
Wuxi Guolian Development Co Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) failed to repay the $541M in bonds that had reached maturity in March. The Wuxi Guolian Development Co’s cash investment will lend some support to the flailing company’s restructuring and rehabilitation plan but in the long run, the amount that is being offered just might not suffice.