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Bottom line: Yingli looks set to receive a
government bailout from Beijing.
Beijing is telling one of the nation’s biggest policy lenders to
provide money for struggling solar panel maker Yingli
before it defaults on a bond payment due next month.
Last week Yingli said it was in desperate negotiations with 2 groups
of creditors, including one holding 1.4 billion yuan ($220 million)
worth of bonds set to mature next month. (previous post) The other group is owed another
1 billion yuan related to an Yingli bond that came due last year,
meaning Yingli needs to find a total 2.4 billion yuan in new money
before next month to avoid a massive default.
I previously said the wording in Yingli’s statement implied it
was negotiating for a broader government rescue, and now the
latest media report from Reuters is saying such a rescue loan
could be coming soon. The report says China’s banking regulator
has asked China Development Bank to guarantee
7.5 billion yuan in loans to Yingli to pay off debts and engineer
a broader company reorganization. (English article)
Such a sum does look like enough to pay off all of the short-term
creditors and also conduct a major overhaul of the company, which
is currently losing massive money. While that might look good for
Yingli, it looks far less positive for China Development Bank,
which could easily lose billions of yuan if Yingli ultimately
fails to repay this big new loan. But then again, Yingli’s rise
was largely fueled by government subsidies, so now it’s not that
surprising to see the government stepping in to prop up the
company one more time.
Doug Young has lived and worked in China for 20 years, much of
that as a journalist, writing about publicly listed Chinese
companies. He currently lives in Shanghai where, in addition to
his role as editor of Young’s China Business Blog, he teaches
financial journalism at Fudan University, one of China’s top
journalism programs.. He writes daily on his blog, Young´s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Line: How The Media Dictates Public Opinion in Modern China.
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