Q-Cells updates restructuring plan: provides four-year revenue guidance

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Financially challenged Q-Cells said it will restructure its finances in two key steps to avoid payment defaults to bondholders. The company confirmed 2011 revenue forecast of around €1 billion but said total losses for the year had yet to be concluded. Q-Cells guided a further decline in revenue in 2012 to approximately €865 million. A return to profitability was not expected until 2014, though this would only occur should all three outstanding convertible bond renegotiations prove successful.

The most immediate challenge is coming to an agreement with holders of the convertible bond due at the end of February 2012. Q-Cells said in a financial filing that “intensive negotiations” had been conducted, though a successful outcome had yet to be reached. Q-Cells had proposed a partial repayment of the outstanding bond volume in tranches over a set period of time.

However, Q-Cells noted that due to a Frankfurt Regional Court ruling, on Monday, January 23, a new bond law from 2009 does not apply to the February 2012 bond issue. Q-Cells had hoped that by the appointment of a joint representative with bondholders, a deal could be struck that could have deferred the convertible bond maturing, yet the court ruled such a procedure was not legally effective. Though Q-Cells said it would appeal the decision, the current ruling would mean Q-Cells would need to reach individual agreements with the creditors; deals of this nature are never certain.

The plan put forward by Q-Cells for convertible bonds due in 2014 and 2015 is to have these restructured via a debt-to-equity swap.

The company also warned that a return to profitability, outside the bonds being successfully restructured could be impacted by the ongoing price wars, should they continue. The statement also noted that the profitability assumptions were based on cost leaders being able to recoup their cost of capital and return to acceptable margin levels, especially after a massive global sector consolidation.

Q-Cells therefore expected to return to sales growth in 2014, via its plan to become an international supplier of photovoltaic solutions, reducing dependence on solar cells and individual components.

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