SolarWorld steps up debt restructuring

June 2013 | DEALFRONT | BANKRUPTCY & RESTRUCTURING

Financier Worldwide Magazine

SolarWorld AG (SWV) announced on 30 April that it had reached a preliminary deal on restructuring its $1.6bn debt load. The heavily indebted German firm proposed a debt-for-equity deal that would see its creditors assume control of the company. The preliminary deal was agreed with creditors representing about 80 percent of the company’s existing loans; however the agreement is still subject to the approval of a number of committees.

SolarWorld, at one point Germany’s largest solar energy company, said that it had agreed with its major creditors to reduce its noncurrent, long term liabilities by around 60 percent. “In all material respects, the creditors of [the company’s two primary bonds] will receive treatment equal to that of the other non-secured financial creditors of the company,” SolarWorld officials wrote in a note to shareholders.The company has €150m of bonds maturing in 2016 and €400m worth due in 2017.

As part of the company’s restructuring, SolarWorld proposed a capital reduction of around 95 percent, which would virtually wipe out existing shareholders. Under the terms of the deal, the company’s existing shareholders, who currently own 100 percent of SolarWorld, would end up with just 5 percent of the firm. Ownership of the company would pass to SolarWorld’s banks and bondholders, including GFC Advisers LLC, Do Investment AG and Pioneer Investment Management Ltd. Currently, CEO and founder of SolarWorld Frank Asbeck owns 27.84 percent of the company.

A day before the announcement of the restructuring deal, SolarWorld reported that its net losses for 2012 had increased by 55 percent to around €477m. The firm also noted that revenues for the period had almost halved, based on price declines in the market of around 40 percent. In a statement, the company also announced that 2012 revenues were down 42 percent to €606m.

SolarWorld has not been the only firm in the solar industry to struggle recently. Indeed, a number of companies have suffered of late, particularly in Germany where more than a dozen firms, including Q-Cells SE, Solar Millennium AG and Solon, have been forced to file for insolvency. In recent years Q-Cells was acquired by South Korean firm Hanwha Group, while Solon was purchased by UAE-based Microsol International LL FZE. Massive industry overcapacity of cells and modules, increased competition from Chinese manufacturers, weak demand, and declining government subsidies have all contributed to the pressure now experienced by firms in the West. Furthermore, solar panel prices dropped by almost half in 2011, followed by a further 24 percent in 2012.

By opting for a debt-for-equity swap, SolarWorld is following in the footsteps of Conergy AG, another German solar energy firm, which gave control of itself over to a number of hedge funds including York Capital and Sothic Capital in 2010.

In January, SolarWorld first announced that it would be required to make a “serious adjustment” to its debt load in order to remain a viable company. “Management is of the opinion that serious adjustments on the debt side are necessary, in particular with regard to the bonds and the assignable bank loans,” said the firm. Those bondholders holding securities worth €550m in total, and maturing in July 2016 and in January 2017, would be hit most by the restructuring, according to a statement released by the company.

As part of the attempts to reverse the company’s fortunes, Mr Asbeck also announced in early May that SolarWorld was close to securing financial backing from a major Qatari investor. Although the size of the stake was not available at the time of writing, Mr Asbeck noted that that information would be published at the company’s extraordinary general meeting.

Richard Summerfield