Big, the only negative thing anyone can in fact say about LDK solar is that they indeed to have a lot of debt. They incurred a ton when they....
1) Initially planned and followed through with their polysilicon plants 2+ years ago
2) Built the largest cell/module plant in the world in Hefie which is just now coming into production this quarter and will ramp BIG TIME in the coming quarters.
So, they could have either issued more shares, or incurred debt to raise capital for aggressive expansion. Current shareholders would have rather raised debt, and that is what they did.
Debt is not a bad thing, as long as you are making more to not only cover the interest, but enough to also pay down the debt when its due.
Now, LDK currently has approximately 800 million to 1.1 billion in cash or cash equivilent on hand. They have about 3 billion in debt.
They are being charged 30 million a quarter on this debt. So that comes off income from operations (as interest expense).
If you added back in LDK's interest expense last quarter, they would have had a net income of 166 million instead of 135 million.
Interest Expense from debt is costing LDK about 20 cents a share per quarter.
HOWEVER, it takes money to make money. If LDK would have never taken loans out to build the poly plant, to expand wafer to over 3 MT a year, and to start making cells and modules, LDK would probably be losing money right now. In this solar environment, it takes economies of scale to be the lowest cost producer, and LDK and all others have to keep up, or die.
It takes money to make money, and LDK is fine right now. They have enough to repurchase 100 million. They have enough to repurchase more if they wanted.
The problem is, if they use money for repurchasing, then they cant use it to expand. But LDK views their share price so cheap right now, the opportunity cost to purchase shares versus CapEx (expanding) is too great. They will make more investing in their shares than they will expanding.
Sorry for the long answer. If anything is vague, reply and i can attempt to expand on it.
