China solar materials giant GCL-Poly’s shares fall on rights issue plan

Shares of solar farm developer subsidiary GCL New Energy also plunge

PUBLISHED : Wednesday, 16 December, 2015, 2:12pm
UPDATED : Wednesday, 16 December, 2015, 4:42pm

GCL-Poly Energy, the world’s largest maker of solar panel raw materials polysilicon and wafers, and its solar farms developer subsidiary GCL New Energy saw their share prices plunge after they announced plans to issue rights shares to raise at least HK$5.8 billion to cut debt and fund projects.

Jiangsu province-based GCL-Poly, 32.5 per cent owned by mainland businessman Zhu Gongshan, has proposed issuing one rights share for every five existing shares at HK$1.12 each to raise at least HK$3.47 billion, it said in a joint filing with GCL New Energy to Hong Kong’s bourse on Wednesday morning.

The issue price represents a 15.8 per cent discount to the closing price of HK$1.33 on Friday, before trading was halted pending an equity fund-raising announcement.

GCL New Energy has proposed issuing one rights share for every eight existing shares at 45 HK cents each to raise a minimum of HK$2.34 billion to fund solar farms development, cut debt and boost working capital.

The issue price is 11.8 per cent lower than the last closing price of 0.51 HK cents on Friday.

GCL-Poly, which owns 62.3 per cent of GCL New Energy, will use part of the proceeds from its rights shares issue to fund its participation in the rights share subscription of GCL New Energy.

The remainder will be used to cut debt and fund working capital.

GCL-Poly closed down 6.8 per cent on Wednesday at HK$1.24. GCL New Energy closed 9.8 per cent lower at 46 HK cents.

To cut debt and interest expenses, GCL-Poly attempted a year ago to sell a wafer plant and a plant that makes ingots used in wafer production to Zhu, saying it wanted to raise funds to ramp up newer, lower-cost capacity of its more lucrative polysilicon production lines.

But the plan was voted down by minority shareholders.

Earlier this month, GCL-Poly raised 3.2 billion yuan by selling its non-solar power generation operations to Zhu.

According to a Daiwa research report, GCL-Poly’s net debt-to-equity ratio is projected to rise from 112 per cent at the end of this year to 170 per cent by the end of next year and to 189 per cent by the end of 2017.