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A solar energy company that designs, develops, manufactures and market a variety of PV cells and modules. Also provides PV system integration services in China.
This company has got some real problems.Short-term pop this week on news that China will build more than 35GW of solar by 2015. Note though that this is from the State Council -- i.e. artificial demand -- and not true demand that comes from the markets.Wuxi Suntech, the company's primary manufacturing subsidiary, has entered bankruptcy courts after it failed to pay $541 million of debt that came due in March. Debt is now eleven times greater than STP's market cap.Even if Suntech miraculously gets out of debt without wiping out equity holders, it is still stuck in a brutally competitive industry. There is an oversupply of solar PV in the world, with everyone chasing after the big projects and margins getting squeezed ever thinner. Europe is also putting huge tariffs on Chinese panels later this summer, which more-or-less isolates Suntech to the artificial sovereign demand of China. Not a recipe for success. Underperform.
Once the massive debt restructuring goes through, STP bondholders will start dumping their new shares. I expect STP to trade down to 5 - 10 cents.
STP will be delisting from the NYSE on Monday. Closing out this pick, to avoid the uncertainty of what happens in the liquidation/bankruptcy courts.From the WSJ yesterday:"On Thursday, the New York Stock Exchange said that Suntech’s shares will be delisted prior to the opening bell on Monday. The reason given for pulling the plug is “uncertainty” as to whether the company can finish its 2012 annual report on time 'in light of the ongoing restructuring involving the company.'"
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