On Monday, Chinese solar giant GCL-Poly Energy Holdings Ltd. defaulted on its $500 million bonds after terminating its exchange offer with existing bondholders.
In a filing to the Hong Kong stock exchange on Feb. 1, GCL-Poly New Energy Holdings Ltd. announced that the default on the three-year bonds due Jan. 30 with an interest rate of 7.1 percent will trigger a cross-default upon termination of the issue.
The company said the cross-default would have a “material adverse effect” on its business and financial condition.
The company operates solar power plants and is majority owned by GCL-Poly, one of the world’s largest manufacturers of solar-grade polysilicon. Its shares have soared 700 percent since China announced plans to become carbon neutral by 2060.
GCL-Poly Energy announced a replacement offer for those bonds in December 2020 and said the company’s cash position and liquidity were deteriorating due to delays in subsidy payments.
The company’s net current liabilities stood at CNY6.5 billion (equivalent to about $1 billion) as of June 30, raising doubts among investors about the company’s ability to continue as a going concern, according to a Dec. 23 statement.
The company has not received any notices or requests for immediate debt repayment, according to Monday’s statement.
The company’s Hong Kong-listed shares have almost doubled this year.
Chuanyi Zhou, a credit analyst at Lucror Analytics in Singapore, said it’s not surprising that GCL-Poly defaulted, as the company has been struggling with its financial woes for years and its underlying credit profile has been poor.
GCL New Energy is one of the renewable energy developers affected by the government’s delayed subsidies, which saw its total debt surge to more than $42 billion last year. As of June 30, the company’s accounts and notes receivable had risen to more than 4.5 billion yuan, up from 1.9 billion yuan four years ago.
GCL New Energy has been selling renewable energy plants to help pay down debt, but the effort hasn’t borne fruit, said Dan Wang, a credit analyst at Bloomberg.
Shares of GCL-Poly Energy were down 2.9 percent in Hong Kong as of 10:23 a.m. Monday.
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