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Current LDK financing status and capital needs:
LDK currently has two credit facilities of significance: one $100 million 5-year facility; and a $500 million line of credit. The latter is a 1-year revolving facility (which is why the debt on this line of credit must be put under the "current debt"). In any case, they have drawn about $260 million on that facility, as of Dec 31. Therefore, basic math tells that they have at least $300 million still available from the two facilities.
LDK estimates that they will put to use about $600-800 million in capital during 2008. Though cash flow remains “tight”, they are managing well and customer prepayments remain their preferred method for financing the capital projects. Mr. Lai provided the following round numbers for 2008 (to a investor group in late March):
·They have about $100 million cash deposit in the bank
·They currently expect about $300m, perhaps $400 million in customer prepayments during the first half of 2008. Another $100 million in the second half.
·They project a net profit of $220 million for 2008 ($1.88 per ADR)
·They have about $300 million available in the existing loan facilities.
The above makes a total of at least $1 billion in cash available for 2008 expansion. While this seems likely to be enough for stated 2008 capital needs, it makes for a tight equation and it is clear that the line of credit (mentioned above) is less than ideal as the fill-gap solution. Interest expenses already amount to some $1.5 million per month (assuming a 6% rate on $300 million) and – more importantly – the line of credit is on a 12-month revolving basis. LDK needs to have either another [longer term] loan, or issue equity to reduce the reliance on the Line of Credit. LDK believes that at current market conditions, issuing new equity is clearly expensive and not in the interests to general investors, that is why LDK choose to issue a $300 convertible bond.
Furthermore, they use 50% of the new funds to buyback for buyback program (about 5 millions stocks) and these stocks will be used for LDK employee incentive option plans.
LDK currently has two credit facilities of significance: one $100 million 5-year facility; and a $500 million line of credit. The latter is a 1-year revolving facility (which is why the debt on this line of credit must be put under the "current debt"). In any case, they have drawn about $260 million on that facility, as of Dec 31. Therefore, basic math tells that they have at least $300 million still available from the two facilities.
LDK estimates that they will put to use about $600-800 million in capital during 2008. Though cash flow remains “tight”, they are managing well and customer prepayments remain their preferred method for financing the capital projects. Mr. Lai provided the following round numbers for 2008 (to a investor group in late March):
·They have about $100 million cash deposit in the bank
·They currently expect about $300m, perhaps $400 million in customer prepayments during the first half of 2008. Another $100 million in the second half.
·They project a net profit of $220 million for 2008 ($1.88 per ADR)
·They have about $300 million available in the existing loan facilities.
The above makes a total of at least $1 billion in cash available for 2008 expansion. While this seems likely to be enough for stated 2008 capital needs, it makes for a tight equation and it is clear that the line of credit (mentioned above) is less than ideal as the fill-gap solution. Interest expenses already amount to some $1.5 million per month (assuming a 6% rate on $300 million) and – more importantly – the line of credit is on a 12-month revolving basis. LDK needs to have either another [longer term] loan, or issue equity to reduce the reliance on the Line of Credit. LDK believes that at current market conditions, issuing new equity is clearly expensive and not in the interests to general investors, that is why LDK choose to issue a $300 convertible bond.
Furthermore, they use 50% of the new funds to buyback for buyback program (about 5 millions stocks) and these stocks will be used for LDK employee incentive option plans.
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