LDK trades lower on earnings; Spansion regains ground; NII lifts on straight debt offering

By Rebecca Melvin

New York, Aug. 13 - LDK Solar Co. Ltd. was a big mover in the convertibles market Thursday, with the convertibles slumping along with their underlying shares after the China-based solar company posted worse-than-expected quarterly results late Wednesday and with the outlook for the entire sector not looking too rosy.

"Their numbers were pretty ugly," a Connecticut-based sellside trader said.

JA Solar Holdings Co. Ltd., which posted its second-quarter results before the open Wednesday, was also weaker, with its underlying shares sliding another 8% on Thursday after dropping 14.5% on Wednesday.

Spansion Inc. convertibles regained a little ground, however, amid renewed interest about the value of the company's assets.

And YRC Worldwide Inc. was choppy in trade.

Overall, the market saw more activity in high-yield and distressed names than in investment-grade issues, sources agreed. The market has settled down considerably since the go-go days of just last week, when a tide of price increases was causing all boats to rise.

"The saying was 'if it has a Cusip, it's higher;' but that's not the case this week," a sellsider said.

Whether pricing weakened further on Thursday compared to Wednesday was difficult to tell, according to another sellsider.

Meanwhile, NII Holdings Inc. convertibles looked a bit stronger after the Reston Va.-based telecommunications service provider to Latin America priced an upsized offering of straight notes.

LDK Solar dims

LDK Solar's 4.75% convertibles due 2013 traded at 68.5 and at 69.5 compared to levels in the mid 70s going into the day, a sellsider said.

LDK Solar's American Depositary shares slumped $2.06, or 18%, to $9.15.

After the market close Wednesday, the solar company posted a wider second-quarter net loss of $216.9 million amid write-downs of $192 million, compared to a net loss of $22.5 million in the year-earlier period.

Revenue was down by nearly 50% to $228.3 million, from $441.7 million in the same period the prior year.

For the third quarter of fiscal 2009, LDK Solar estimates its revenue to be in the range of $240 million to $270 million with wafer shipments between 260 MW to 300 MW and module shipments between 10 MW to 20 MW.

LDK Solar said that during preparation of its second-quarter 2009 financial results, management determined that an inventory write-down and loss on firm purchase commitments of polysilicon materials of about $175.8 million and $16.7 million, respectively, was required as a result of the continued rapid market price decline for solar wafers.

As a result, gross margin for the second quarter was negative 90%, compared to 1.7% in the first quarter and 25.4% in the second quarter of fiscal 2008.

The net loss for the second quarter of fiscal 2009 was $216.9 million, or $2.03 per diluted ADS, compared to a net loss of $22.5 million, or $0.21 per diluted ADS for the first quarter of fiscal 2009.

LDK Solar ended the second quarter of 2009 with $265.7 million in cash and cash equivalents and $123.0 million in short-term pledged bank deposits.

JA Solar weaker

JA Solar's 4.5% convertibles due 2013 looked to be weaker by 2 points to 4 points, trading at the end of the day at 77.

Shares of the Ningjin, China-based company settled lower by 35 cents, or 7.8%, at $4.12.

The Chinese solar power company reported a wider second-quarter loss and said that prices on its solar cells were lower by nearly 30%. Revenue collapsed 51% to $88 million.

On Thursday, Barclays Capital downgraded JA Solar shares to "equal weight" from "overweight."

Spansion strengthens again

Spansion's 2.25% exchangeables due 2016 were quoted at 18.75 bid, 19.25 offered on Thursday, which was up from previous levels of 17 bid, 18 offered.

The paper had faded from the highs of 20 bid, 21 offered last week, and then it had been quiet at the beginning of this week.

But there was a report about a company in China making an offer for some of its operations, a New York-based sellside trader said, and interest resumed.

"It got the interest going. There was a little strength," the sellsider said.

YRC trades wildly

YRC, formerly known as Yellow Roadway Corp., traded "all over the place" Thursday, a sellsider said.

The YRC 5% convertibles due 2023 traded at 29.5 in the Street, but they also printed at 35.125, the sellsider said.

There was also a print at 37.5 compared to levels at around 30 a few days ago.

"People are all over the place," the sellsider said. "I think it's buy in problems, but that's just me talking."

Shares of the Overland Park, Kan.-based transportation service provider bounced back a little after losing 11% on Wednesday, ending the day Thursday up 2 cents, or almost a percentage point, at $2.07.

NII trades a little better

NII's 2.75% paper due 2025, with a call/put in one year in August 2010, was last at 97.25, which was up from 97 on Monday. Shares of the wireless company settled at $24.19, which was up 2.7% on the day.

NII Holdings, through its subsidiary NII Capital Corp., upsized its straight debt deal to $800 million from $500 million on Thursday.

The 10% seven-year senior notes were sold at 97.568 to yield 10.5%, according to high-yield primary sources.

The pricing came at the wide end of pre-deal market price talk envisioning a yield of between 10¼% and 10½%.

The Rule 144A and Regulation S, with registration rights, deal was brought to market via bookrunners Morgan Stanley & Co., Inc. and J.P. Morgan Securities Inc.

NII plans to use proceeds for general corporate purposes, which may include expansion of its existing network, either through capital spending for internal expansion or acquisitions of other operators; the acquisition of telecommunications spectrum licenses or other assets; the deployment of new network technologies and/or the refinancing, repayment or repurchase of outstanding debt, or other purposes.

Mentioned in this article:

JA Solar Holdings Co. Ltd. Nasdaq: JASO

LDK Solar Co. Ltd. NYSE ADRs: LDK

NII Holdings Inc. Nasdaq: NIHD

Spansion Inc. Pink Sheets: SPSN

YRC Worldwide Inc. Nasdaq: YRCW

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