LDK Solar provides five-year financial guidance on back of bondholder proposals

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LDK Solar has provided bondholders with a long-range forecast of its financial recovery over the next five years but expects investors to take a massive haircut or ultimately face a complete loss on the investment.

The company issued a statement on 27 December 2013 outlining is possible sector sales and revenue generation from 2014 through to the end of 2018, though heavily cautioned that investors should not “place undue reliance” on such projections.

Annual revenue guidance

LDK Solar projected revenue in 2014 to be in the range of US$1.24 billion. The company had given recent guidance for 2013 of revenue reaching US$575 million to US$625 million. The company had posted revenue in the first nine months of 2013 of US$375.6 million. 

Key to a revenue rebound in 2014 would be the sales from polysilicon and wafers as well as a significant increase in sales from PV modules, the company said.

LDK Solar is therefore expecting to restart polysilicon production after receiving finance to complete plant upgrades that are designed to reduce production costs below ASPs which have yet to recover above US$20/kg on the spot market. The company is hoping to complete upgrades by the end of March 2014.

The company noted that it expected polysilicon shipments of 10,350MT in 2014, while reaching nameplate capacity of 18,000MT from its two production plants in 2015. LDK Solar projected capacity to remain at its nameplate level through 2018.

Annual revenue is expected to increase to US$1.63 billion in 2015, US$1.79 billion in 2016 and reach US$1.849 billion in 2017, yet revenue was projected to fall slightly in 2018 to US$1.846 billion.

Having guided wafer shipments for the fourth quarter of 2013 to be in the range of 480MW to 520MW and reported increased wafer shipments of 384.7MW in the third quarter, up from 303.9MW in the second quarter of the year, LDK Solar projected wafer shipments in 2014 to increase to 3.3GW.

Wafer shipments are projected to increase to 3.84GW in 2015 and remain at that level through 2018.

The flat shipments for polysilicon and wafers after 2015 could be due to capital expenditure projections of only US$16 million per annum through to the end of 2018.

PV module shipments were also expected to increase significantly compared to 2013. LDK Solar projected module shipments of 781MW in 2014, rising to 1,406MW by the end of 2017 and flat in 2018.

However, module sales in 2013 have been almost non-existent due to bankability issues.

Bondholder haircut

LDK Solar is still attempting to gain a formal agreement with some of its bondholders after partially defaulting earlier in 2013 and failing to meet interest payments. The company noted that no agreement has been made with bondholders but put forward publically for the first time a range of drastic cuts to creditors' investments whether they choose to convert convertible noted to new securities or cash-out completely.

Providing limited cash-out opportunity due to its financial position, bondholders would be recouping just US$0.20 cents on the dollar.

Bondholders have the option of new securities that include 8.736% of the claim to be paid in LDK Solar ordinary shares at US$1.586 per share, subject to lock-up, a discount to the current stock price. The remaining 91.264% of the claim is to be paid in convertible bonds to be issued by LDK Solar and not due until 2018.

LDK Solar has bigger debts than Suntech Power Holdings, which also defaulted on a bond last year. Bondholders of Suntech have been forced to file bankruptcy proceedings on Suntech in a bid to recoup investments.

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