Shares of Suntech Power Holdings Co. Ltd. (STP) closed Thursday at their lowest level, as the company faced a potential default on $541 million of bonds barring a last-minute deal with debt holders.
Shares of Suntech Power Holdings Co. Ltd. (STP) closed Thursday at their lowest level, as the company faced a potential default on $541 million of bonds barring a last-minute deal with debt holders.

The Chinese solar giant said Monday that it had reached a "forbearance agreement" with roughly 60% of its foreign bondholders to continue negotiating a payment deal after a Friday deadline to pay the investors $541 million.

Those investors agreed to wait until May 15 to exercise their rights, under the deal, Suntech said Monday.

It was unclear, however, whether the remaining 40% of Suntech bondholders would sign on to the forbearance, or whether they would push for payment of the bond on Friday.

Suntech said Thursday that it didn't plan to make the payment Friday and that it was "not aware of any pending or planned actions or claims in relation to such non-payment by the trustee or the holders of the notes."

Shares of Suntech sank 19% Thursday to 67 cents a share, the company's lowest closing price since it went public in 2005.

Suntech's 3% convertible bonds were trading Thursday at $32 per $100 of the bonds' original value, according to market data on the Financial Industry Regulatory Authority's website.

When corporate bonds trade at such low levels, it implies a default is likely, with some investors expecting some level of repayment. The current market value of the bonds, at 32 cents on the dollar, showed an expectation that about $173 million of the $541 million owed could be paid back.

Some analysts suggested that a last-minute bailout of Suntech by one or more Chinese government organizations would be investors' last hope.

"The [roughly] $500 million convertible bond is due tomorrow, and in the absence of any bailout, we believe the company will need to undergo a full restructuring, most likely involving a de facto takeover by a government-sponsored enterprise," said Raymond James analyst Pavel Molchanov. "It is unclear whether a publicly traded equity will remain in place under such a restructuring, but what is clear is that [Suntech] will be an even less investable stock than it had been up to this point."

Raymond James has stopped providing analysis on Suntech stock, Mr. Molchanov said.

Suntech, which at one time was the world's largest solar-panel manufacturer, has been struggling under the weight of about $2 billion of debt, while its profits have declined amid a global oversupply of solar panels, sliding prices and antidumping tariffs imposed by the U.S. government on Chinese solar equipment.

The company has been working to resolve its problems.

Suntech said last week that it had settled a dispute over a European investment fund, called Global Solar Fund, that had been managed by a former sales agent. Suntech had said last July that it had been a victim of fraud in a financing deal involving the fund and 560 million euros in German government bonds.

On Tuesday, Suntech said it would shut its solar-panel assembly plant in Arizona to cut costs amid a restructuring.

Suntech shares experienced "unusual trading activity" Thursday and the company was contacted by the New York Stock Exchange Inc. in connection with the activity, the company said.

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