Yingli Secures New Credit Facilities, Further Complicates Structure (YGE)

Yingli Green Energy Holding Company Limited (NYSE: YGE) is seeing shares get clipped a bit this morning.  Some may be on weak energy prices taking the hot air out of alternative energy and some may be from the weak market indications.  But the company has announced two credit facilities, with principal amounts of $100 million and RMB 300 million, respectively.

The first was granted by Bank of Communications, the early repayment of the full principal amount of US$50 million together with accrued interest and fees thereon to a fund managed by Asia Debt Management Hong Kong Limited, and the issuance of the second tranche of senior secured convertible notes in the amount of approximately $29.4 million to Trustbridge Partners II, L.P.

The Offshore Center of Bank of Communications has granted a two-year credit facility of $100 million to Yingli Green Energy International Trading Limited, which is a wholly-owned subsidiary of Yingli. Repayment obligations for this credit facility will be guaranteed by the company and by Baoding Yingli Group Company Limited, an affiliate of Yingli.

Baoding Tianwei Yingli New Energy Resources Co., Ltd., an operating subsidiary of the company in China, will put forth a cash collateral equal to 25% of $100 million for this credit facility.

The Hebei Branch of Bank of Communications has granted a one-year renewable credit facility of RMB 300 million to Tianwei Yingli and repayment obligations for this credit facility will be guaranteed by Yingli Group, an affiliate of the Company.

Yingli Energy (China) Company Limited, also a wholly owned subsidiary of Yingli located in Baoding, China, made an early repayment of the full principal amount of $50 million plus accrued interest and fees under the previously announced three-year loan facility with ADM Capital. All relevant financial and business covenants, together with collateral given in connection with the loan, were released immediately after the early repayment.

Additionally, Yingli Green Energy issued the second tranche of senior secured convertible notes due 2012 in the principal amount of approximately $29.4 million to Trustbridge under the terms of the previously announced note purchase agreement entered into in January 2009.  Trustbridge purchased this second tranche note using the proceeds received by its affiliate, Gold Sight International Limited, from the repayment of the promissory note issued by Grand Avenue Group Limited.  Grand Avenue is a company controlled by Mr. Liansheng Miao, Chairman and Chief Executive Officer of the Company.  This was said to be in connection with the acquisition of Cyber Power Group Limited in January 2009. The Company expects to use the proceeds from the issuance of the Second Tranche Note for general corporate purposes.

The company now believes that the increased cash level and improved balance sheet will help Yingli to further raise the “bankability” of its products and make it more competitive when bidding for large projects.

So, if you had trouble following the terms here, you may come to the same conclusion we came to.  The company’s capital structure and credit structure has just become more complex and complicated when you consider the parent company, the affiliates, and the subsidiaries.

China is frequently tricky enough without the complicated structures.  On the surface, it seems as though Yingli’s structure is getting more complicated when you consider subsidiaries and affiliates.

Jon C. Ogg
July 6, 2009