Is it really news that Solar panel maker Shanghai Chaori Solar Energy Science & Technology has defaulted on its bonds? (Soap Box on)

Solar panel maker Shanghai Chaori Solar Energy Science & Technology has defaulted on interest payments owed on its bond

http://www.chaorisolar.com/upload/2013030601595268.pdf The actual statement about corporate bonds, please use a decent translator service. This was made on the 1st March, but they have offered $400K on that $1b debt, I hope you sense my humour there!

It comes as no surprise as I had discussed earlier about the Chinese Development Grants, and how this creates a false market especially in the Solar Panel industry. The timing of the notices and default appears to have been made for the Company to be high profile to ‘attempt’ to force the Chinese Authorities to ‘bail out’ the Solar manufacturer and avoid a default. Afterall, look at the share ownership structure, how many more companies in China underpinned by various Chinese Authority / Government Department’s and/or Companies nevermind the fact is been suspended for how long?

If people look back at the history, its no surprise ‘Directors’ (loose term) were resigning for some time prior to the news. Nevermind the fact the company was suspended for how long? Yet alleged decent Journalists are now suggesting it’s “sudden news” that has come to light. This company, like many Solar companies has been unable to meet it’s interest payments on bonds for a long time despite the solar industry prices picking up from an all-time lows. It’s not something new, this didn’t materialise as a result of other issues, they merely didn’t generate enough cashflow/profit from sales to maintain the payment of interest (& the shrewd parties (myself included) realised this when shorting the stocks of those listed outside China. In essence, without a qualification in accounting, but an understanding of accounts on a basic level, I dare say the liabilities were known about prior to the 1^st March when the original announcement was made by some 6 months, but as it wasn’t due till a certain date the company elected to wait and the bonds were a bet on improving markets that would never materialise.

So what next, the positive is, without some form of protectionary restructuring, it will be very positive for the Solar Industry if Market forces are allowed to run their natural course. Albeit I wonder what the Chinese Government will do, it’s a small default but is there a ‘scapegoat’ here where other manufacturers perhaps have received “grants” that enabled them to restructure. A timely lesson, especially as the Chinese Railway is seeking to raise significant finance to underpin expansion and improvements. The Consolidation mandate has been informally issued by the lack of the ‘emergency government assistance.’

Amazingly, more press has been generated from this default than the other defaults by Solar Companies “offshore” which have created larger losses and greater debts, but “been able to consolidate” due to Governmental Assistance. The Communist theory of “state ownership” is being contradicted by the bail outs of capitalistic entities, and more importantly the distorted accounts that appear to make a Company profitable when it has received development or government funding from various agencies. 

I would however like to thank a certain person for adapting my previous commentary including typo on the Solar ‘Crisis’ and putting it out as their own, you will be hearing from me!

China, either has to embrace market forces or adapt a different culture whereby they’re clearly allowing second tier of lending which is akin to a 1990’s Window Salesman’s explaining if you don’t buy now the opportunity is gone tomorrow…

Atb Fraser