NEW YORK (
is offering holders of $300 million in existing convertible notes a cash sweetener to avoid having to repurchase the notes itself in April.
LDK Solar announced the proposed deal after the market close Wednesday.
The existing convertible notes, totaling $395 million, had been among the overhang on LDK shares this year, as the Chinese solar company is required to accept any offers to repurchase all or a portion of the notes on April 15, 2011. The notes don't mature until 2013.
Yet LDK Solar has made strides in shoring up what has arguably been among the worst balance sheets in solar, receiving a $9 billion loan commitment from the China Development Bank in September, for one. In fact, the LDK Solar stock rally -- its shares are up 65% in the past three months -- coincided with growing investor confidence in its unstable balance sheet. Strong pricing in its core solar wafer market has also been a rallying point.
Mark Bachman, analyst at Auriga Securities, had said earlier this year: "With a strike price on the 2013 convertible debt of ~$39/ADS, we find it likely that the $400 million in outstanding convertible bonds will be put back to the company in April 2011."
LDK Solar shares closed on Friday at $11.13. The Chinese solar company plans to pay for the exchange offer with cash on hand.
The $300 million in convertible notes that LDK hopes holders will exchange for new notes, also to be due in 2013, would include a cash consideration of $60 to $85 per each $1,000 in notes held. LDK plans to hold a "Dutch auction" for determining the cash consideration.
The LDK Solar deal will expire Dec. 22. Existing convertible note holders will also be paid cash in an amount equal to the accrued and unpaid interest on the existing notes as of the day before the exchange settlement.
-- Written by Eric Rosenbaum from New York.
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