6-K 1 d784653d6k.htm FORM 6-K Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2014

Commission File Number: 001-33464

 

 

LDK SOLAR CO., LTD.

(Translation of registrant’s name into English)

 

 

Hi-Tech Industrial Park

Xinyu City

Jiangxi Province 338032

People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  x            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No   x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

 

 

 


LDK Solar Files Evidence in the Cayman Islands in Support of Scheme of Arrangement Petition

We, LDK Solar CO., Ltd., in provisional liquidation, together with our Joint Provisional Liquidators, Tammy Fu and Eleanor Fisher, both of Zolfo Cooper (Cayman) Limited, have today filed with the Grand Court of the Cayman Islands (the “Cayman Court”) evidence in support of the petition dated August 29, 2014 commencing our restructuring proceedings in the Cayman Court. The first hearing before the Cayman Court will take place on September 12, 2014. At that hearing, orders will be sought convening meetings of scheme creditors on or around October 16, 2014 to consider and approve the schemes of arrangement.

Attached hereto as Exhibit 99.1 is the proposed Explanatory Statement (with certain restructuring specific Appendices and those with information previously submitted to or filed with the SEC omitted) included in the filing bundle.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

LDK SOLAR CO., LTD., in provisional liquidation
  By:  

/s/ Jack Lai

  Name:   Jack K.S. Lai
  Title:   Company Secretary

Date: September 8, 2014

 

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Exhibit 99.1

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

This document comprises an explanatory statement in relation to linked and inter-conditional schemes of arrangement proposed by the joint provisional liquidators of LDK Solar CO., Ltd. (in provisional liquidation) and the directors of LDK Silicon & Chemical Technology Co., Ltd. and LDK Silicon Holding Co., Limited pursuant to section 673 of the Companies Ordinance (Cap 622) of Hong Kong and, in relation to LDK Solar CO., Ltd. and LDK Silicon & Chemical Technology Co., Ltd., pursuant to section 86 of the Companies Law (2013 Revision) of the Cayman Islands (the “Explanatory Statement”). It is being sent to persons who it is believed are or may be Scheme Creditors at the date of this Explanatory Statement. If you have assigned, sold, or otherwise transferred, or assign, sell or otherwise transfer, your interests as a Scheme Creditor before the Record Time you must forward this Explanatory Statement and the accompanying documents at once to the person or persons to whom you have assigned, sold or otherwise transferred, or assign, sell or otherwise transfer, your interests as a Scheme Creditor.

If you are in any doubt as to the contents of this Explanatory Statement or the documents that accompany it or what action you should take, you are recommended to seek your own independent financial, legal and tax advice immediately from your financial, legal and/or tax adviser.

This Explanatory Statement is accompanied by:

 

1. The Senior Solicitation Packet, as set out at Appendix 12 (Senior Solicitation Packet), which is also available on the Scheme Website for Senior Note Scheme Creditors. The Senior Solicitation Packet contains (i) instructions and guidance for Senior Note Scheme Creditors and any person with an interest in the Senior Notes, in completing the Account Holder Letter and Ballot; and (ii) the Account Holder Letter and Ballot, which also encloses the Capitalisation Request Form and the Distribution Confirmation Deed.

 

2. The Preferred Solicitation Packet, as set out at Appendix 13 (Preferred Solicitation Packet), which is also available on the Scheme Website for Preferred Obligation Scheme Creditors. The Preferred Solicitation Packet contains (i) instructions and guidance for Preferred Obligation Scheme Creditors in completing the Preferred Proxy Form; and (ii) the Preferred Proxy Form, which also encloses the Capitalisation Request Form and the Distribution Confirmation Deed.

 

3. The Ordinary Solicitation Packet, as set out at Appendix 14 (Ordinary Solicitation Packet), which is also made available on the Scheme Website for Ordinary Scheme Creditors. The Ordinary Solicitation Packet contains (i) instructions and guidance for Ordinary Scheme Creditors in completing the Ordinary Proxy Form; and (ii) the Ordinary Proxy Form, which also encloses the Capitalisation Request Form and the Distribution Confirmation Deed.

Further copies of this Explanatory Statement can be obtained by contacting:

If you are a Senior Note Scheme Creditor and/or a CN Holder, the Information Agent on +44(0)20 7704 0880 or by e-mail to ldk@lucid-is.com;

 

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If you are Preferred Obligation Scheme Creditor or an Ordinary Scheme Creditor, the JPL’s on +1 345 946 0082 or by email to ldkenquiries@zolfocooper.ky.

 

 

EXPLANATORY STATEMENT IN RELATION TO LINKED AND INTER-CONDITIONAL

SCHEMES OF ARRANGEMENT

UNDER SECTION 86 OF THE COMPANIES LAW (2013 REVISION) AND

SECTION 673 OF THE COMPANIES ORDINANCE (CAP 622)

BETWEEN

LDK SOLAR CO., LTD. (IN PROVISIONAL LIQUIDATION)

(AN EXEMPTED COMPANY INCORPORATED WITH LIMITED LIABILITY

UNDER THE LAWS OF THE CAYMAN ISLANDS WITH REGISTERED NUMBER 166736)

AND

LDK SILICON & CHEMICAL TECHNOLOGY CO., LTD.

(AN EXEMPTED COMPANY INCORPORATED WITH LIMITED LIABILITY AND

REGISTERED UNDER THE LAWS OF THE CAYMAN ISLANDS WITH

REGISTERED NUMBER 234412 AND REGISTERED AS A NON-HONG KONG

COMPANY WITH THE HK REGISTRAR OF COMPANIES UNDER CR NO. F0018833)

AND

LDK SILICON HOLDING CO., LIMITED

(A HONG KONG COMPANY REGISTERED WITH THE HK REGISTRAR OF

COMPANIES UNDER CR NO. 1410399)

IN THE HIGH COURT OF HONG KONG UNDER SECTION 673 OF THE

COMPANIES ORDINANCE

(CAP 622) IN RELATION TO EACH OF THE ABOVE NAMED COMPANIES

AND

IN THE GRAND COURT OF THE CAYMAN ISLANDS UNDER SECTION 86 OF

THE COMPANIES LAW

(2013 REVISION) IN RELATION TO THE FIRST AND SECOND OF THE ABOVE

NAMED COMPANIES

AND THE

SCHEME CREDITORS

(AS DEFINED IN THIS EXPLANATORY STATEMENT)

DATE: []

 

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The Record Time for the Schemes will be 11am (Cayman Islands time) on 15 October 2014/midnight (Hong Kong time) on 16 October 2014. The Scheme Class Meetings for the Scheme Creditors to consider and vote on the Schemes will be held as follows:

 

1. The Preferred Obligation Scheme Creditors will be entitled to vote at the Preferred Obligation Meetings comprising:

 

  (a) the LDK Silicon CI Preferred Meeting to be held on 16 October 2014 at 8:00pm (Cayman Islands time) / 17 October 2014 at 9:00am (Hong Kong time);

 

  (b) the LDK Solar CI Preferred Meeting to be held on 16 October 2014 at 8:10pm (Cayman Islands time) / 17 October 2014 at 9:10am (Hong Kong time);

 

  (c) the LDK Silicon HK Preferred Meeting to be held on 16 October 2014 at 8:50pm (Cayman Islands time) / 17 October 2014 at 9:50am (Hong Kong time);

 

  (d) the LDK SH Preferred Meeting to be held on 16 October 2014 at 9:00pm (Cayman Islands time) / 17 October 2014 at 10:00am (Hong Kong time);

 

  (e) the LDK Solar HK Preferred Meeting to be held on 16 October 2014 at 9:20pm (Cayman Islands time) / 17 October 2014 at 10:20am (Hong Kong time);

 

2. The Senior Note Scheme Creditors will be entitled to vote at the Senior Note Meetings comprising:

 

  (a) the CI Senior Note Meeting to be held on 16 October 2014 at 8:20pm (Cayman Islands time)/ 17 October 2014 at 9.20am (Hong Kong time);

 

  (b) the HK Senior Note Meeting to be held on 16 October 2014 at 9:10pm (Cayman Islands time)/ 17 October 2014 at 10:10am (Hong Kong time);

 

3. The Ordinary Scheme Creditors will be entitled to vote at the Ordinary Meetings comprising:

 

  (a) the LDK Solar CI Ordinary Meeting to be held on 16 October 2014 at 8:30pm (Cayman Islands time)/ 17 October 2014 at 9.30am (Hong Kong time); and

 

  (b) the LDK Solar HK Ordinary Meeting to be held on 16 October 2014 at 8:40pm (Cayman Islands time)/ 17 October 2014 at 9:40am (Hong Kong time).

 

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Notices convening the Scheme Class Meetings are set out in:

 

    For Senior Note Scheme Creditors, Appendix 9 (Notice of Senior Note Meetings) of this Explanatory Statement;

 

    For Preferred Obligation Scheme Creditors, Appendix 10 (Notice of Preferred Meetings) of this Explanatory Statement; and

 

    For Ordinary Scheme Creditors, Appendix 11 (Notice of Ordinary Meetings) of this Explanatory Statement.

The Cayman Scheme Meetings, comprising the LDK Silicon CI Preferred Meeting, the LDK Solar CI Preferred Meeting, the CI Senior Note Meeting and the LDK Solar CI Ordinary Meeting, will be held at the offices of Campbells at Floor 4, Willow House, Cricket Square, George Town, Grand Cayman KY1-1103. Once the Cayman Scheme Meetings have concluded, the Hong Kong Scheme Meetings, comprising LDK Solar HK Ordinary Meeting, LDK Silicon HK Preferred Meeting, LDK SH Preferred Meeting, HK Senior Note Meeting and the LDK Solar HK Preferred Meeting, will be held at Sidley’s Hong Kong offices at 39/F, Two International Finance Centre Central, Hong Kong.

Scheme Creditors who attend the Cayman Scheme Meetings will also be able to attend the Hong Kong Scheme Meetings, via video conference from Campbells’ offices. Similarly, Scheme Creditors who attend the Hong Kong Scheme Meetings will also be able to attend the Cayman Scheme Meetings, via video conference from Sidley’s Hong Kong offices. Scheme Creditors will also be able to dial into each of the Cayman Scheme Meetings and the Hong Kong Scheme Meetings using the LDK Dial-In Details.

The hearing before the Grand Court to determine whether or not the Grand Court will sanction the Cayman Scheme will take place at 9:30am (Cayman Islands time) on 6 November 2014. The hearing before the High Court to determine whether or not the High Court will sanction the Hong Kong Scheme will take place such time as the High Court may direct. Scheme Creditors will have the right to attend and be heard at both hearings.

Instructions about actions to be taken by:

 

1. The Senior Note Scheme Creditors preceding the Senior Note Meetings are set out in Part 4 (Senior Note Scheme Creditors), along with Appendix 12 (Senior Solicitation Packet) of this Explanatory Statement;

 

2. The Preferred Obligation Scheme Creditors preceding the Preferred Obligation Meetings are set out in Part 5 (Preferred Obligation Scheme Creditors), along with Appendix 13 (Preferred Solicitation Packet) of this Explanatory Statement; and

 

3. The Ordinary Scheme Creditors preceding the Ordinary Meetings are set out in Part 6 (Ordinary Scheme Creditors), along with Appendix 14 (Ordinary Solicitation Packet) of this Explanatory Statement.

 

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Whether or not you intend to attend any Scheme Class Meetings, you are requested to complete, execute and return:

 

1. In the case of the Senior Note Scheme Creditors, the Account Holder Letter and Ballot, which will also enclose the Capitalisation Request Form and the Distribution Confirmation Deed;

 

2. In the case of the Preferred Obligation Scheme Creditors, the Preferred Proxy Form, which will also enclose the Capitalisation Request Form and the Distribution Confirmation Deed; and

 

3. In the case of the Admitted Ordinary Scheme Creditors, the Ordinary Proxy Forms, which also will enclose the Capitalisation Request Form and the Distribution Confirmation Deed,

which each accompany this Explanatory Statement in accordance with the instructions printed thereon as soon as possible and in any event by 11am (Cayman Islands time) on 15 October 2014.

Further important information is set out under the sections entitled Important Notice to Scheme Creditors and Important Securities Law Notice to this Explanatory Statement.

 

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INDEX

PRELIMINARY SECTIONS

 

1.

 

Expected Timetable of Principal Events’

     8  

2.

 

Important Notice to Scheme Creditors

     11  

3.

 

Important Securities Law Notice

     18  

4.

 

Letter from the JPLs of LDK Solar and the Directors of LDK Silicon and LDK Silicon Holding (the “Directors”) to the Scheme Creditors

     25  

5.

 

Communications Policy

     37  
PART 1   

6.

 

Background to the Schemes and the Chapter 11 Plan

     39  
PART 2   

7.

 

Introduction to the Schemes

     56  
PART 3   

8.

 

Overview of the Chapter 11 Plan

     87  
PART 4   

9.

 

Senior Note Scheme Creditors

     89  
PART 5   

10.

 

Preferred Obligation Scheme Creditors

     95  
PART 6   

11.

 

Ordinary Scheme Creditors

     98  
PART 7   

12.

 

Scheme Consideration Elections

     106  
PART 8   

13.

 

Transaction Overview

     111  
PART 9   

14.

 

Overview of the Group

     130  
PART 10   

15.

 

Risk Factors

     169  
PART 11   

16.

 

Tax

     188  

APPENDICES

 

Appendix 1:    (Definitions and Interpretation)
Appendix 2:    (February 2014 Order)
Appendix 3:    (April 2014 Order)
Appendix 4:    (June 2014 Order)
Appendix 5:    (July 2014 Order)
Appendix 6:    (August 2014 Order)
Appendix 7:    (Cayman Scheme)
Appendix 8:    (Hong Kong Scheme)
Appendix 9:    (Notice of Senior Note Meetings)
Appendix 10:    (Notice of Preferred Meetings)
Appendix 11:    (Notice of Ordinary Meetings)
Appendix 12:    (Senior Solicitation Packet)
Appendix 13:    (Preferred Solicitation Packet)
Appendix 14:    (Ordinary Solicitation Packet)

 

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Appendix 15:    (Corporate Structure Chart)
Appendix 16:    (Current Financing and Security Structure for the LDK Offshore Entities)
Appendix 17:    (Post-restructuring Finance and Security Structure for the LDK Offshore Entities)
Appendix 18:    (Summary of Material Contracts)
Appendix 19:    (Related Party Transactions carried out between 1 January 2013 to 30 June 2014)
Appendix 20:    (Actual or threatened legal proceedings against Group Companies)
Appendix 21:    (Options granted under the 2006 and 2013 Stock Incentive Plan)
Appendix 22:    (Amended Interim Funding Agreement)
Appendix 23:    (HRX Commitment)
Appendix 24:    (SPI Commitment)
Appendix 25:    (LDK International Loan Agreement)
Appendix 26:    (List of Restructuring Documents)
Appendix 27:    (Registration Rights Agreement)
Appendix 28:    (2018 Convertible Bond Indenture)
Appendix 29:    (Preferred Convertible Bond Indenture)
Appendix 30A:    (Preferred Convertible Pledge Agreement)
Appendix 30B:    (Preferred Convertible Pledge Trustee Appointment)
Appendix 31:    (LDK Silicon Pledge)
Appendix 32:    (Subsidiary Guarantee)
Appendix 33:    (Trust Distribution Deed)
Appendix 34:    (List of CN Settlement Agreements)
Appendix 35:    (Scheme Consideration for Senior Note Scheme Claims)
Appendix 36:    (Scheme Consideration for Ordinary Claims)
Appendix 37:    (Scheme Consideration for Preferred Obligation Scheme Claims)
Appendix 38:    (2012 Audit)
Appendix 39:    (Liquidation Analysis)
Appendix 40:    (Unaudited Management Accounts to 31 December 2013)
Appendix 41:    (Unaudited Management Accounts to 30 June 2014)
Appendix 42:    (Unaudited Quarterly Accounts)

 

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Preliminary Section

 

1. EXPECTED TIMETABLE OF PRINCIPAL EVENTS1,2

Senior Note Scheme Creditors and CN Holders should observe any deadlines set by any institution or settlement system through which they hold interests in the Senior Notes or the CNs (as applicable) to ensure that any voting instructions given by them are taken into account at the Senior Note Meetings and the Ordinary Meetings (as applicable). We would strongly urge each Senior Note Scheme Creditor and CN Holder to contact its relevant Account Holder/ CN Account Holder or Intermediary/CN Intermediary as soon as possible to ensure they are aware of this Explanatory Statement and the process and timetable set out in it.

 

Event

  

Expected date

  

Time

C.I.

  

Time

UTC

  

Time

H.K.

Custody Instruction Deadline - latest time for blocking the CNs and the Senior Notes in the relevant Clearing Systems    14 October 2014    11:00    15:00    24:00
Voting Instruction Deadline – latest time and date for delivery of Account Holder Letters and Ballot, the Preferred Proxy Form, the CN Account Holder Letter and the Ordinary Proxy Form in order for the Scheme Creditors’ voting instructions to be taken into account for the purposes of the Scheme Class Meetings.    15 October 2014    11:00    15:00    24:00
Record Time3    15 October 2014    11:00    15:00    24:00
Cayman Scheme Meetings4    LDK Silicon CI Preferred Meeting    16 October 2014    20:00    24:00   

09:00

 

17th

 

1  Unless otherwise stated, all references to time in this Explanatory Statement are to Cayman Islands time.
2  The dates in this timetable and mentioned throughout this Explanatory Statement assume that none of the Court hearings or the Scheme Class Meetings are adjourned or delayed. It is also possible that the drawing up or registration of the orders of the Grand Court and the High Court sanctioning the Schemes may be delayed if any person appeals either order. At the time this Explanatory Statement is circulated, the High Court may not have made orders to convene the Hong Kong Scheme Meetings. The timing of any Hong Kong Scheme Meeting set out in this Explanatory Statement may therefore be different to that stated, and the Hong Kong Scheme Meetings might not occur at all if the High Court declines to make orders sought.
3  All Scheme Claims are determined as at the Record Time. The Scheme Supervisors will be entitled to exercise discretion as to whether they recognise any assignment or transfer of Scheme Claims after the Record Time.
4  The Cayman Scheme Meetings and the Hong Kong Scheme Meetings will commence at the times stated. Any Scheme Creditor that wishes to attend the Scheme Class Meetings should produce a duplicate copy of the Account Holder Letter (in the case of Senior Note Scheme Creditors) or the Preferred Proxy Form (in the case of the Preferred Obligation Scheme Creditors) or the Ordinary Proxy Form (in the case of the Ordinary Scheme Creditors) executed and delivered on its behalf, evidence of corporate authority (in the case of a corporation) (for example, a valid power of attorney and/or board minutes) and evidence of personal identity (for example, a passport or other picture identification) at the registration desk by no later than one hour before the scheduled time of each Scheme Class Meeting.

 

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Event

  

Expected date

  

Time

C.I.

  

Time

UTC

  

Time

H.K.

   LDK Solar CI Preferred Meeting    16 October 2014    20:10    24:10   

09:10

 

17th

   CI Senior Note Meeting    16 October 2014    20:20    24:20   

09:20

 

17th

   LDK Solar CI Ordinary Meeting    16 October 2014    20:30    24:30   

09:30

 

17th

Hong Kong Scheme Meetings

   LDK Solar HK Ordinary Meeting    16 October 2014    20:40    24:40   

09:40

 

17th

   LDK Silicon HK Preferred Meeting    16 October 2014    20:50    24:50   

09:50

 

17th

   LDK SH Preferred Meeting    16 October 2014    21:00   

01:00

 

  

10:00

 

17th

   HK Senior Note Meeting    16 October 2014    21:10   

01:10

 

  

10:10

 

17th

   LDK Solar HK Preferred Meeting    16 October 2014    21:20   

01:20

 

  

10:20

 

17th

Court hearing to sanction the Cayman Scheme

   6 November 2014    09:30    13:30    22:30

Court hearing to sanction the Hong Kong Scheme

   As ordered by the High Court         

Scheme Effective Date

   Satisfaction of Scheme Conditions         

Bar Date

   21 Business Days after the Effective Date         

Payment Date

   In the case of the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount, 7 days after the Effective Date; and in the case of Ordinary Cash Out Amount, such date as the Scheme Supervisors shall determine         

 

9


Event

  

Expected date

  

Time

C.I.

  

Time

UTC

  

Time

H.K.

Issue Date

   In the case of the Senior Note Non-Cash Consideration and the Preferred Obligation Non-Cash Consideration, 7 days after the Effective Date; and in the case of Admitted Ordinary Claims, such date as the Scheme Supervisors shall determine         

Scheme Longstop Date

   31 December 2014         

 

10


2. IMPORTANT NOTICE TO SCHEME CREDITORS

Unless the context otherwise requires, all capitalised terms used in this Explanatory Statement shall have the meanings set out in Appendix 1 (Definitions and Interpretation) of this Explanatory Statement.

Information

This Explanatory Statement has been prepared in connection with schemes of arrangement under:

 

  (a) section 86 of the Companies Law in relation to the linked and inter-conditional Cayman Scheme between each of the Cayman Scheme Companies (being LDK Solar and LDK Silicon) and the Scheme Creditors; and

 

  (b) section 673 of the Companies Ordinance in relation to the linked and inter-conditional Hong Kong Scheme between each of the Scheme Companies (being LDK Solar, LDK Silicon and LDK Silicon Holding) and the Scheme Creditors,

and has been prepared solely for the purpose of providing information to Scheme Creditors in relation to the Schemes.

Also, as set out in this Explanatory Statement, Senior Note Scheme Creditors shall be entitled to vote on and approve the terms of the Chapter 11 Plan to be proposed by the directors of each of the US Senior Note Guarantors, being LDK Solar USA and LDK Solar Tech USA, along with LDK Solar Systems. A summary of the terms of the Chapter 11 Plan are set out in Part 3 (Overview of the Chapter 11 Plan) of this Explanatory Statement. In addition, Senior Note Scheme Creditors are directed to refer to Part 4 (Senior Note Scheme Creditors) for instructions and guidance on the actions that the Senior Note Scheme Creditors should take in connection with the Scheme and the Chapter 11 Plan.

Nothing in this Explanatory Statement or any other document issued with or appended to it should be relied on for any purpose other than for Scheme Creditors to make a decision on the Schemes and, in the case of Senior Note Scheme Creditors, the Chapter 11 Plan. In particular and without limitation, nothing in this Explanatory Statement should be relied on in connection with the purchase or acquisition of any Senior Note Scheme Claim, the Preferred Obligations or any other financial instruments, securities, assets or liabilities of the Scheme Companies or any other Group Company.

Nothing contained in this Explanatory Statement constitutes a recommendation, or the giving of advice, by the JPLs, the Scheme Supervisors, the Scheme Companies or any other member of the Group to take a particular course of action or to exercise any right conferred by the Senior Notes or the Scheme Shares, in each case in relation to, buying, selling, subscribing for, exchanging, redeeming, holding, underwriting, disposing of, or converting Senior Notes, Scheme Shares or any other financial instruments, securities, assets or liabilities of the Scheme Companies or any other Group Company.

 

11


Scheme Creditors

This Explanatory Statement is to be distributed to Scheme Creditors, who comprise (i) the Senior Note Scheme Creditors; (ii) the Preferred Obligation Scheme Creditors; and (iii) the Ordinary Scheme Creditors. Information on the actions that Scheme Creditors are required to take under the Schemes are set out in:

 

  (a) For Senior Note Scheme Creditors, Part 4 (Senior Note Scheme Creditors) at page 90 of this Explanatory Statement;

 

  (b) For Preferred Obligation Scheme Creditors, Part 5 (Preferred Obligation Scheme Creditors) at page 96 of this Explanatory Statement; and

 

  (c) For Ordinary Scheme Creditors, Part 6 (Ordinary Scheme Creditors) at page 99 of this Explanatory Statement.

Ordinary Scheme Creditors comprise creditors who hold a Claim against LDK Solar as at the Record Time, other than a Senior Note Scheme Claim, a Preferred Obligation Scheme Claim, a Preferred Documents Claim, an Intercompany Claim or an Excluded Claim. With the exception of the CN Holders, all Ordinary Scheme Creditors must vote on the Schemes by submitting their Ordinary Proxy Form to the JPLs. CN Holders will be required to submit its voting instructions on the Schemes through the CN Account Holder Letter. Further information on submitting the Ordinary Proxy Form and the CN Account Holder Letter is set out in the Ordinary Solicitation Packet.

Notice to Scheme Creditors

Without prejudice to the representations and warranties to be given by the Scheme Companies in the Restructuring Documents, nothing contained in this Explanatory Statement shall constitute a warranty, undertaking or guarantee of any kind, express or implied, and nothing contained in this Explanatory Statement shall constitute any admission of any fact or liability on the part of the JPLs, the Scheme Companies or the Scheme Supervisors with respect to any asset to which it or they may be entitled or any claim against it or them. Without prejudice to the generality of the foregoing, nothing in this Explanatory Statement or the distribution thereof evidences to any person, or constitutes any admission by the JPLs, the Scheme Companies, or the Scheme Supervisors that a liability is owed to any person in respect of any claim (including without limitation any Scheme Claim) or that any person is or may be a Scheme Creditor. The failure to distribute this Explanatory Statement to any Scheme Creditor shall not constitute an admission by the JPLs, the Scheme Companies or the Scheme Supervisors that such person is not a Scheme Creditor.

No person has been authorised by the Scheme Companies, the JPLs or the Scheme Supervisors to give any information or make any representations concerning the Restructuring Documents (including the Schemes) which is inconsistent with this Explanatory Statement and, if made, such representations shall not be relied upon as having been so authorised.

The information contained in this Explanatory Statement has been prepared based upon information available to the JPLs or the Scheme Companies prior to the date of this Explanatory Statement. The delivery of this Explanatory Statement does not imply that the information herein is correct as at any time subsequent to the date hereof. To the best of the Scheme Companies’ and the JPLs’ knowledge, information and belief, the information contained in this Explanatory Statement is in accordance with the facts and does not omit anything likely to affect the import of such information, each in a material respect. The Scheme Companies and the JPLs have taken all reasonable steps to ensure that this Explanatory Statement contains the information reasonably necessary and material to enable Scheme Creditors to make an informed decision about how the Restructuring Proposal affects them.

 

12


None of the Scheme Companies’ or the JPLs’ advisers have verified that the information contained in this Explanatory Statement is materially in accordance with facts and does not omit anything likely to affect the import of such information in any material way, and each of those persons expressly disclaims responsibility for such information.

This Explanatory Statement has not been reviewed, verified or approved by any rating agency, the Senior Note Trustee, or any regulatory authority. Without prejudice to the representations and warranties to be given by the Scheme Companies in any Restructuring Document, to the fullest extent permitted by law, the JPLs, the Scheme Supervisors or the Scheme Companies will have no tortious, contractual or any other liability to any person in connection with the use of this Explanatory Statement and the JPLs, the Scheme Supervisors and the Scheme Companies will not accept any liability whatsoever to any person, regardless of the form of action, for any lost profits or lost opportunity, or for any indirect, special, consequential, incidental or punitive damages arising from any use of this Explanatory Statement, its contents or preparation or otherwise in connection with it, even if the JPLs, the Scheme Supervisors or the Scheme Companies have been advised of the possibility of such damages.

The Chapter 11 Plan and Recognition Filings

After the convening hearings for the Cayman Scheme, the Hong Kong Scheme and the commencement of solicitation on the Schemes and Chapter 11 Plan, the JPLs intend to file a petition for recognition of the LDK Solar Cayman Scheme by making the Recognition Filing. In connection with this filing, the JPLs expect to request certain “first day” provisional relief from the Bankruptcy Court pending the Bankruptcy Court’s recognition determination. Further, once the Schemes have been sanctioned by the Grand Court and the High Court, the JPLs intend to request, upon notice to parties in interest and after the opportunity for such parties to be heard, that the Bankruptcy Court recognise certain provisions of the Schemes and the making of the Grand Court Order.

On or about the time the JPLs make the Recognition Filings, the Prospective US Debtors intend to file the Chapter 11 Plan seeking relief under chapter 11 of the Bankruptcy Code. The Prospective US Debtors intend to seek confirmation of the Chapter 11 Plan concurrently with the Bankruptcy Court’s recognition of the Schemes.

Publication of unaudited consolidated accounts

In connection with the Schemes and the Chapter 11 Plan, the Group has prepared the Unaudited Management Accounts, comprising unaudited condensed consolidated management account information for the fiscal year ended 31 December 2013 and for the six months ended 30 June 2014. A copy of these accounts are set out in Appendix 40 (Unaudited Management Accounts to 31 December 2013) and Appendix 41 (Unaudited Management Accounts to 30 June 2014) of this Explanatory Statement.

 

13


The Group has also prepared and submitted to the SEC the unaudited quarterly accounts, comprising unaudited condensed consolidated quarterly financial information for the fiscal quarters ended 31 March, 30 June and 30 September 2013. These accounts are set out in Appendix 42 (Unaudited Quarterly Accounts) of this Explanatory Statement.

The unaudited management accounts and the unaudited quarterly accounts are preliminary in nature and are provided to Scheme Creditors for reference only and are subject to change and adjustment upon audit.

LDK Solar (acting through the JPLs) has engaged KPMG to carry out an audit on LDK Solar’s financial statements and the consolidated financial statements of the Group for the year ended 31 December 2013. The JPLs anticipate that the audit will be completed by KPMG prior to 31 October 2014. The JPLs will notify Scheme Creditors once this audit has been completed and make a copy of the audited financial statements available on the Scheme Website.

Restrictions

The distribution of this Explanatory Statement to or in certain jurisdictions may be restricted by law or regulation and persons into whose possession this Explanatory Statement comes are requested to inform themselves about, and to observe, any such restrictions. Failure to comply with any such restrictions could result in a violation of the laws of such jurisdictions.

Summary only

The summary of the principal provisions of the Schemes and the Chapter 11 Plan contained in this Explanatory Statement is qualified in its entirety by reference to each of the Cayman Scheme, the Hong Kong Scheme and the Chapter 11 Plan themselves. The full text of the Cayman Scheme and the Hong Kong Scheme is set out in Appendix 7 (Cayman Scheme) and Appendix 8 (Hong Kong Scheme), respectively. Senior Note Scheme Creditors will also be provided with the full text of the Chapter 11 Plan and the Disclosure Statement, in addition to the full texts of the Schemes and this Explanatory Statement. Each Scheme Creditor is advised to read and consider carefully the text of both the Cayman Scheme and the Hong Kong Scheme and the Chapter 11 Plan (in the case of the Senior Note Scheme Creditors only). This Explanatory Statement has been prepared solely to assist Scheme Creditors in respect of voting on the Schemes.

In the event of a conflict between the information and terms described in:

 

  (a) this Explanatory Statement and the Disclosure Statement; and

 

  (b) the Schemes and/or a Chapter 11 Plan,

the terms of the Schemes and/or the Chapter 11 Plan shall prevail.

 

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The Scheme Companies shall be at liberty to modify the Schemes, or to propose a different scheme of arrangement, at any time prior to sanction of the Schemes and delivery of the relevant court order to the relevant registrar of companies. The Scheme Companies shall enjoy such liberty notwithstanding any actions in reliance on the Schemes or this Explanatory Statement by a Scheme Creditor or any other person.

The JPLs

The JPLs act as agents for and on behalf of LDK Solar and neither they nor their firm, affiliated firms, employees, advisers, agents, partners, directors, members, officers or representatives, shall incur any personal liability whatsoever in respect of any of the obligations undertaken by the Scheme Companies, or in respect of any failure on the part of the Scheme Companies to perform or comply with any such obligations, or under any associated arrangements or negotiations, or under any document entered into pursuant to the Schemes or any Restructuring Document, or otherwise.

None of the JPLs or their firm, affiliated firms, employees, advisers, agents, partners, directors, members, officers or representatives shall incur any personal liability whatsoever under the Schemes, this Explanatory Statement or any Restructuring Document nor in relation to any related matter or claim, whether in contract, tort (including without limitation negligence) or restitution or by reference to any other remedy or right in any jurisdiction or forum.

The exclusions of liability as set out in the Schemes, this Explanatory Statement or any Restructuring Document shall continue notwithstanding the termination of the agency of the JPLs or their discharge from office as joint provisional liquidators of LDK Solar before or after the Effective Date and shall operate as a waiver of any claims in tort as well as under contract.

Each of the JPLs, their firm, affiliated firms, employees, advisers, agents, partners, directors, members, officers and representatives shall be entitled to rely on and enjoy the benefit of these exclusions as if they were party to the Schemes, the Explanatory Statement or any Restructuring Document.

Any joint provisional liquidator of LDK Solar appointed after the Effective Date shall be entitled to rely on and enjoy the benefit of these exclusions as if they were a party to the Schemes, the Explanatory Statement or any Restructuring Document.

Nothing in this Explanatory Statement shall require the JPLs to take any action which would breach any applicable law or regulation.

Offering Memorandum

The Senior Notes were issued pursuant to the Offering Memorandum. This Explanatory Statement should be read in conjunction with the Offering Memorandum. This Explanatory Statement is not a prospectus within the meaning of article 3 of Directive 2003/71/EC, or a prospectus equivalent document.

In connection with the Schemes, LDK Solar intends to rely on the exemption provided in Section 3(a)(10) of the US Securities Act for the issuance of the Scheme Consideration in exchange for the Scheme Claims, subject to the approval of the Grand Court and the High Court, by sanctioning the Schemes, of the fairness of the terms and conditions of such exchange. There is no assurance, however, that such exemption will be available to LDK Solar, as there is no assurance that the proceedings relating to the Schemes will comply with all conditions necessary for the application of such exemption under the US Securities Act.

 

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Forward-looking Statements

Nothing in this Explanatory Statement shall be deemed to be a forecast, projection or estimate of the future financial performance of the Scheme Companies and/or any Group Company except where otherwise specifically stated.

This Explanatory Statement contains statements, estimates, opinions and projections with respect to the Scheme Companies and the Group and certain plans and objectives of the Scheme Companies and the Group. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “will”, “may”, “should”, “would”, “could” or other words of similar import. These statements are based on numerous assumptions and assessments made by the JPLs and the Scheme Companies as appropriate in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors which they believe appropriate. No assurance can be given that such expectations will prove to be correct. Forward-looking statements involve significant risks and uncertainties, they should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. Such forward-looking statements only speak as at the date of this Explanatory Statement. A number of factors could cause actual results to necessarily differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors and uncertainties set out in Part 10 (Risk Factors) of this Explanatory Statement. Each Scheme Creditor is urged to make its own assessment of the validity of such forward-looking statements and their underlying assumptions and no liability is accepted by the JPLs, the Scheme Supervisors and the Scheme Companies in respect of the achievement or failure thereof of such forward-looking statements and assumptions. Should one or more of these risks or uncertainties materialise, or should the underlying assumptions prove incorrect, actual results may vary materially from those described in such forward-looking statements and accordingly in this Explanatory Statement.

Risk Factors

Scheme Creditors’ attention is drawn to certain risks and uncertainties associated with the Restructuring Proposal that are set out in Part 10 (Risk Factors) of this Explanatory Statement. Each Scheme Creditor should carefully read and analyse such risk factors and uncertainties, and fully understand the impact, which may be material and adverse, on its financial condition and prospects. The statement of risk factors is not and is not intended to be an exhaustive statement of such factors or of all possible factors which might influence the decision of Scheme Creditors as regards the Schemes or any investment decision.

 

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Legal, tax and financial advice

Scheme Creditors should not construe the contents of this Explanatory Statement as legal, tax or financial advice.

This Explanatory Statement has been prepared without taking into account the objectives, financial situation or needs of any particular recipient of it, and consequently, the information contained in this Explanatory Statement may not be sufficient or appropriate for the purpose for which a recipient might use it. Each Scheme Creditor should conduct its own due diligence and consider the appropriateness of the information in this Explanatory Statement having regard to its own objectives, financial situations and needs. Scheme Creditors are also recommended to consult their own professional advisers as to legal, tax, financial or other aspects relevant to any action Scheme Creditors might take in relation to the Schemes and the Restructuring Transactions, or the implications/consequences of such action.

This Explanatory Statement is addressed to Scheme Creditors for their information only and no person should rely on it in formulating or reaching any investment decision. Scheme Creditors must rely on their own due diligence and their professional advisers in their decisions with respect to the Schemes and the Restructuring Transactions.

Other Jurisdictions

The implications of the Restructuring Transactions for Scheme Creditors who are residents or citizens of jurisdictions other than the Cayman Islands and Hong Kong may be affected by the laws of the relevant jurisdictions. Such overseas Scheme Creditors should inform themselves about and observe any applicable legal requirements in their respective jurisdictions. Any person outside the Cayman Islands or Hong Kong who is resident in, or who has a registered address in, or is a citizen of, an overseas jurisdiction should consult independent professional advisers and satisfy themselves as to the full observance of the laws of the relevant jurisdiction in connection with the Schemes and the Restructuring Transactions, including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such jurisdiction.

Scheme Creditors should consult their own professional advisers with respect to the Restructuring Transactions and other matters described in this Explanatory Statement, including the legal, financial and tax consequences of the Schemes, the Chapter 11 Plan and the Restructuring Transactions in their particular circumstances.

 

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3. IMPORTANT SECURITIES LAW NOTICE

U.S. Securities Law Considerations

LDK Solar intends to rely on the exemption from the registration requirements of the US Securities Act provided in Section 3(a)(10) thereof for the issuance of the Scheme Consideration to Scheme Creditors in exchange for their Scheme Claims, specifically the Cash Out Amounts and/or the Non-Cash Scheme Consideration, as applicable to Scheme Creditors, as contemplated in the Schemes and the Chapter 11 Plan. This exemption is available subject to the following conditions:

 

    The Non-Cash Scheme Consideration must be issued predominantly in exchange for Scheme Claims;

 

    The Non-Cash Scheme Consideration is issued to Scheme Creditors who are not affiliates of LDK Solar; and

 

    The Grand Court and the High Court, having been previously advised of LDK Solar’s reliance on their respective determinations on the Section 3(a)(10) exemption, must hold an open hearing and approve the fairness of the terms and conditions of the exchange.

However, each Scheme Creditor should note that Section 3(a)(10) does not exempt any converted securities upon conversion of the convertible securities contained in the Non-Cash Scheme Consideration. Such converted securities may be registered under the US Securities Act pursuant to the Registration Rights Agreement, if applicable, or may be transferred pursuant to any other exemption from the registration requirements to the extent available under the US Securities Act and other securities or blue sky laws of any State of the United States.

LDK Solar is relying on each of the following in order to avail itself of the exemption from the registration requirements of the US Securities Act as provided in Section 3(a)(10) for the issuance of the Non-Cash Scheme Consideration to Scheme Creditors in exchange for their Scheme Claims:

 

    Under the laws of the Cayman Islands and Hong Kong, the Grand Court and the High Court will not approve the Schemes for the issuance of the Scheme Consideration to Scheme Creditors in exchange for their Scheme Claims unless each court finds the transaction to be fair to the persons who will receive the Scheme Consideration;

 

    The Scheme Creditors have received notice of, and have the right to attend or appear by Counsel at, the Sanction Hearing of the Grand Court and the High Court; and

 

    LDK Solar advised the Grand Court and the High Court before the Sanction Hearing that it would rely on the Section 3(a)(10) exemption and not register the Scheme Consideration under the US Securities Act to be issued to the Scheme Creditors in exchange for their Scheme Claims based on the Grand Court’s and the High Court’s sanctioning the Schemes at the Sanction Hearing.

 

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In connection with the issue of the Scheme Consideration, the Capitalisation Request Form as attached to the Account Holder Letter or the Proxy Forms, as applicable, will require Scheme Creditors who intend to receive either the Non-Cash Scheme Consideration, instead of and in lieu of receiving the Cash Out Amount to confirm, amongst other things, that the relevant Scheme Creditor, Account Holder (if applicable) and/or Designated Recipient is not an affiliate of LDK Solar. If the confirmation required by the Capitalisation Request Form as attached to the Account Holder Letter or the Proxy Forms, as applicable, cannot be or are not given, the relevant Scheme Creditor, Account Holder (if applicable) and/or Designated Recipient will not be eligible to receive the Non-Cash Scheme Consideration through the Section 3(a)(10) exchange and may be treated as a Disqualified Person under the applicable laws.

None of the Non-Cash Scheme Consideration has been or will be registered under the US Securities Act, except for the contemplations of the Registration Rights Agreement relating to the conversion of the 2018 Convertible Bonds, and the Preferred Convertible Bonds. Scheme Creditors who are not Disqualified Persons but are otherwise not entitled to rely on the exemption provided by Section 3(a)(10) of the US Securities Act may receive Non-Cash Scheme Consideration in “restricted securities” (as defined by Rule 144(a)(3) under the US Securities Act), and such Non-Cash Scheme Consideration as restricted securities may not be offered, sold, pledged or otherwise transferred except: (a) pursuant to an effective registration statement under the US Securities Act, including pursuant to the Registration Rights Agreement, and such transfer is registered pursuant to, or exempt from, or not subject to, any other applicable securities laws covering such securities; (b) in accordance with Rule 144A of the US Securities Act (“Rule 144A”), if available, to a person that the transferor, and any person acting on its behalf, reasonably believes is a “qualified institutional buyer” (a “QIB”) as defined in Rule 144A purchasing for its own account or for the account of one or more QIBs; (c) in accordance with Rule 144 (“Rule 144”) under the US Securities Act, and LDK Solar receives evidence satisfactory to it that the provisions of Rule 144 have been complied with; (d) in an offshore transaction in accordance with Regulation S under the US Securities Act; (e) to LDK Solar or its Subsidiaries; or (f) in accordance with another exemption from registration under, or transaction not subject to, the US Securities Act and, if requested, LDK Solar receives an opinion of counsel from the holder of these securities to such effect, reasonably satisfactory to LDK Solar, and in each case in accordance with any applicable securities laws of any State of the United States.

The ADSs were listed on the NYSE until 31 March 2014 when the staff of NYSE Regulation Inc., commenced proceedings to delist LDK Solar’s ADSs as a result of a severe sell-side imbalance where it was concluded by the NYSE’s regulation counsel, Floor Governor and the Designated Market Maker, that the NYSE could not make a viable market in LDK Solar’s shares. The NYSE had previously suspended the listing on 21 February 2014 following the submission of LDK Solar’s winding up petition to the Grand Court on that date. Although the NYSE suspension is still subject to the completion of the delisting proceedings, and pending appeal by LDK Solar which is listed for hearing before a committee of the Board of Governors of the NYSE on 9 September 2014, the ADSs have been quoted on the OTC Pink Limited Information under the symbol “LDKSY” while suspended on the NYSE. LDK Solar will, however, use its best efforts to cause the ADSs to remain listed on the NYSE and, if delisted from the NYSE, will use its best efforts to obtain an alternate listing on a reputable national exchange as soon as possible.

 

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Neither the SEC nor any U.S. State or other securities commission or regulatory authority has approved or disapproved of the Scheme Consideration or passed upon the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

Scheme Creditors should consult their own legal, financial and tax advisers with respect to the legal, financial and tax consequences of the Schemes, the Scheme Consideration and the Restructuring Proposal in their particular circumstances.

Securities Law Considerations in Other Jurisdictions

European Economic Area

This Explanatory Statement is only being distributed to and is only directed at Scheme Creditors: (i) who are not incorporated or situated in any member state of the European Economic Area, (ii) who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive, or (iii) in compliance with any other circumstances falling within Article 3(2) of the Prospectus Directive (all such persons together being referred to as “Relevant Persons”). This Explanatory Statement has been prepared on the basis that all offers of the Scheme Consideration will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus for offers of the Scheme Consideration. Accordingly, any person making or intending to make any offer within the EEA of the Scheme Consideration should only do so in circumstances in which no obligation arises for LDK Solar to produce a prospectus for such offer. LDK Solar has not authorised the making of any offer of any of the Scheme Consideration through any financial intermediary other than offers made by LDK Solar as contemplated by this Explanatory Statement.

The Scheme Consideration is only available to the Scheme Creditors (in accordance with the terms of the Schemes) and any invitation, offer or agreement to subscribe for, purchase or otherwise acquire such Scheme Consideration will only be engaged in with Relevant Person; provided that if any such Relevant Person is a qualified investor acting as a “financial intermediary” (as such terms are used in the Prospectus Directive), it has not elected for any Scheme Consideration and will not subscribe for the Scheme Consideration on a non-discretionary basis on behalf of, nor will the Scheme Consideration be acquired with a view to its offer or resale to, persons in circumstances which may give rise to an offer of shares to the public, provided also that no such offer of any of the Scheme Consideration shall require LDK Solar to publish a prospectus pursuant to the Prospectus Directive. Any person who is not a Relevant Person should not act or rely on this Explanatory Statement or any of its contents.

For the purposes of this provision, the expression an “offer of Scheme Consideration to the public” in relation to the Scheme Consideration in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Scheme Consideration to be offered so as to enable an investor to decide to purchase or subscribe for the Scheme Consideration, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

 

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Germany

According to § 2 no. 6 Vermögensanlagegesetz (VermAnlG, status 2011/06/12, last amended 2013/04/10), the obligation to publish a prospectus and therefore a potential liability ceases to apply to investment products offered by a company, which is affiliated to the recipient company, since these kind of investment products do not fulfill the requirement of a domestic public offer “within Germany”.

United Kingdom

In the United Kingdom, this Explanatory Statement is only being distributed to and is only directed at (i) persons who have professional experience in matters relating to investments and who qualify as Investment Professionals in accordance with Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); (ii) high net worth companies, unincorporated associations, partnerships or trustees in accordance with Article 49(2) of the Order; and (ii) Scheme Creditors falling with Article 43(2) of the Order (together, “relevant persons”). This Explanatory Statement must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Explanatory Statement relates, including the Scheme Consideration, is available only to relevant persons and will be engaged in only with relevant persons. Any persons other than relevant persons should not act or rely on this Explanatory Statement.

Hong Kong

This Explanatory Statement has not been and will not be registered with the HK Registrar of Companies in the Hong Kong Special Administrative Region of the PRC.

Each agent has represented and agreed, and each further agent appointed by LDK Solar will be required to represent and agree, that:

 

  (a) it has not offered or sold, and will not offer or sell, in Hong Kong, by means of any document, any Scheme Consideration other than:

 

  (i) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong) and any rules made thereunder; or

 

  (ii) in circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance; and

 

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  (b) unless it is a person permitted to do so under the applicable laws of Hong Kong, it has not issued, or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue (in each case whether in Hong Kong or elsewhere), any advertisement, invitation, offering material or document relating to the Scheme Consideration, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong, other than with respect to the Scheme Consideration which is or is intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong) and any rules made thereunder.

People’s Republic of China

Each agent has acknowledged that the Scheme Consideration has not been and will not be registered under the relevant laws of the PRC. Accordingly, each agent represents, warrants and agrees that it has not made, and will not make, any offer, promotion, solicitation for sales or sale of or for, as the case may be, any Scheme Consideration in the PRC, except where permitted by the China Securities Regulatory Commission or where the activity otherwise is permitted under the laws of the PRC.

Cayman Islands

There is no registration required or made under the Securities Investment Business Law in the Cayman Islands or with the Cayman Islands Monetary Authority in relation to this Explanatory Statement and the Explanatory Statement is only distributed to Scheme Creditors such that it does not represent an offer to the public in the Cayman Islands under any law in the Cayman Islands.

British Virgin Islands

This Explanatory Statement has not been and will not be registered with the British Virgin Islands Financial Services Commission. No security is or shall be offered to the public in the British Virgin Islands for purchase or subscription for the purposes of the Securities and Investment Banking Act, 2010.

General

There will be no offer of Scheme Consideration in any state or jurisdiction in which such offer would be unlawful prior to qualification under securities law of such state or jurisdiction.

The implications of the Schemes for Scheme Creditors who are resident in, have a registered address in or are citizens of any other jurisdictions may be affected by the laws of such jurisdictions. Such Scheme Creditors should inform themselves about and observe any applicable legal requirements and should consult his or her professional advisers and satisfy himself or herself as to the full observance of the laws of the relevant jurisdiction in connection with the Schemes including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such jurisdiction.

 

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In the absence of bad faith, none of the Scheme Companies, the JPLs, the Scheme Supervisors, the Information Agent or any person appointed to distribute the Scheme Consideration shall have any liability for any loss or damage arising as a result of the timing or terms of such a sale or as a result of any remittance made pursuant to such distribution.

Disqualified Persons

Without limiting the information set out in this section (Important Securities Law Notice), the Non-Cash Scheme Consideration will not be issued to a Scheme Creditor pursuant to the Schemes where such Scheme Creditor is a Disqualified Person. However, such a Scheme Creditor may designate a Designated Recipient (who itself must not be a Disqualified Person) to receive the Non-Cash Scheme Consideration, provided, however, that when designating a Designated Recipient, a Scheme Creditor which is a Disqualified Person will be required to represent and warrant to LDK Solar that it will retain no beneficial interest in the Non-Cash Scheme Consideration designated to be held by the Designated Recipient.

Certain ERISA and Related Considerations

TO COMPLY WITH TREASURY DEPARTMENT CIRCULAR 230, PROSPECTIVE INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES CONTAINED OR REFERRED TO IN THIS EXPLANATORY STATEMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY PROSPECTIVE INVESTORS, FOR THE PURPOSES OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”); (B) SUCH DISCUSSION IS BEING USED IN CONNECTION WITH THE PROMOTION OR MARKETING BY US OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.

The U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain fiduciary and related requirements on employee benefit plans (as defined in Section 3(3) of ERISA) that are subject to Part 4 of Subtitle B of Title I of ERISA (“ERISA Plans”), and on the persons charged with administering and investing the assets of ERISA Plans, called “fiduciaries” under ERISA. Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan, or the assets of a plan, account or arrangement that is not subject to ERISA but is subject to Section 4975 of the Code, such as a U.S. individual retirement account (a “Tax Advantaged Arrangement”), and certain persons (referred to as “parties in interest” under ERISA and “disqualified persons” under the Code) having certain relationships to the ERISA Plan or Tax Advantaged Arrangement, unless a statutory or administrative exemption applies to the transaction. A party in interest or Disqualified Person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and Section 4975 of the Code. In addition, a fiduciary of an ERISA Plan who engages in or causes the ERISA Plan to engage in a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code.

 

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In circumstances described in regulations promulgated by the U.S. Department of Labor, 29 C.F.R. Section 2510.3 101 (as modified by Section 3(42) of ERISA, the “Plan Asset Rules”), if an ERISA Plan or Tax Advantaged Arrangement (each, a “Plan”) invests in an “equity interest” of an entity that is neither a “publicly offered security” under U.S. law nor a security issued by an investment company registered under the U.S. Investment Company Act, the Plan’s assets will include both the equity interest and an undivided interest in each of the entity’s underlying assets, unless it is established that the entity is an “operating company” or that equity participation in the entity by Plans or entities themselves holding “plan assets” under the Plan Asset Rules (collectively, “Benefit Plan Investors”) is not “significant”. Equity participation in an entity by Benefit Plan Investors will be “significant” if 25% or more of the value of any class of equity interest in the entity is held by Benefit Plan Investors, excluding interests held by certain persons managing or providing investment advice to the entity and by certain of their affiliates. An “equity interest” is defined under the Plan Asset Rules as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. If an entity is subject to “look through” treatment in this manner under the Plan Asset Rules, the entity and its operations and investments will be directly subject to ERISA and to the prohibited transaction provisions of the Code, and the persons charged with managing the entity and investing its assets will be treated as “fiduciaries” under ERISA and the prohibited transaction provisions of the Code.

U.S. based governmental plans, certain church plans, non U.S. plans and other plans, while not subject to the fiduciary responsibility provisions of Title I of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state, local, federal or non U.S. laws that are substantially similar to the foregoing provisions of ERISA and the Code (“Similar Laws”).

The foregoing discussion regarding ERISA and the Code is general in nature and does not purport to be complete.

Fiduciaries of any Scheme Creditor that is a plan, arrangement or entity subject to Section 406 of ERISA or Section 4975 of the Code or to any Similar Law should consult with their counsel concerning the matters described in this section. Scheme Creditors will be required to make certain representations, or deemed representations, regarding their status as Benefit Plan Investors and the application to them of any Similar Law in order to receive Scheme Consideration.

None of the securities referred to in this Explanatory Statement may be sold, issued or transferred in any jurisdiction in contravention of applicable law.

 

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4. LETTER FROM THE JPLS OF LDK SOLAR AND THE DIRECTORS OF LDK SILICON AND LDK SILICON HOLDING (THE “DIRECTORS”) TO THE SCHEME CREDITORS

[] September 2014

Dear Scheme Creditor,

 

1. INTRODUCTION

The JPLs and the Directors write to you in your capacity as a Scheme Creditor. The Scheme Creditors comprise (i) the Senior Note Scheme Creditors; (ii) the Preferred Obligation Scheme Creditors; and (iii) the Ordinary Scheme Creditors.

This letter forms part of the Explanatory Statement for the Schemes proposed by LDK Solar and LDK Silicon (in the case of the Cayman Scheme), and by LDK Solar, LDK Silicon and LDK Silicon Holding (in the case of the Hong Kong Scheme) as part of the Restructuring Proposal, the details of which are explained below.

Defined terms used in this letter are included in Appendix 1 (Definitions and Interpretation) of this Explanatory Statement.

 

2. POWERS AND OBLIGATIONS OF THE JPLS

The February 2014 Order

On 27 February 2014, the Grand Court appointed Eleanor Fisher and Tammy Fu, both partners of Zolfo Cooper (Cayman) Limited as joint provisional liquidators of LDK Solar (the “JPLs”). A copy of the February 2014 Order is located at Appendix 2 (February 2014 Order) of this Explanatory Statement.

The February 2014 Order provided that the JPLs are jointly and severally authorised to exercise (amongst other things) the following powers without further sanction from the Grand Court:

 

  (a) Bring or defend any action or other legal proceeding in any jurisdiction in the name and on behalf of LDK Solar;

 

  (b) Deal with all questions in any way relating to or affecting the assets or the provisional liquidation of LDK Solar;

 

  (c) Control and otherwise deal with all existing bank accounts in the name of LDK Solar and to open new bank accounts in LDK Solar’s name;

 

  (d) Promote a scheme of arrangement under section 86 of the Companies Law; and

 

  (e) Take all necessary and appropriate steps to retain the listing of the ADSs representing LDK Solar’s shares on the NYSE.

 

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In addition, the Grand Court also made the following orders (amongst others):

 

  (f) The JPLs are not authorised to cause or permit LDK Solar to enter into any restructuring support agreement with any of its holders of Senior Notes or any of its Preferred Investors (as defined therein) or any other party without prior sanction of the Grand Court;

 

  (g) The JPLs are not authorised to cause or permit LDK Solar to enter into any restructuring loan agreement with LDK New Energy or any other loan with any other lender without prior sanction of the Grand Court;

 

  (h) The JPLs are authorised to take such action as may be necessary to obtain recognition of their appointment as provisional liquidators of LDK Solar in any other relevant jurisdiction and to make applications to the courts of such jurisdictions for that purpose, including seeking recognition under Chapter 15 of the Bankruptcy Code (and such other relief as may be required) from the Bankruptcy Court;

 

  (i) The JPLs shall establish a liquidation committee comprised of LDK Solar’s creditors (for which purpose the beneficial owners of LDK Solar’s Senior Notes shall be treated as creditors); and

 

  (j) The winding up petition and the summons for the appointment of provisional liquidators shall be adjourned for a further hearing in open court on 2 April 2014 (the “April 2014 Hearing”).

The April 2014 Hearing

On 2 April 2014, the JPLs, through their Cayman Islands lawyers, Campbells, attended the April 2014 Hearing. Pursuant to the April 2014 Orders, the Grand Court ordered that:

 

  (k) the JPLs be authorised to cause LDK Solar to enter into, execute and perform the Senior Note RSA and the Preferred RSA;

 

  (l) the JPLs be authorised to cause LDK Solar to enter into and perform the Original Interim Funding Agreement with HRX; and

 

  (m) the winding up petition be adjourned generally and the provisional liquidation of LDK Solar be continued until further order of the Grand Court.

A copy of the April 2014 Order is located at Appendix 3 (April 2014 Order) of this Explanatory Statement.

The June 2014 Order

Following the April 2014 Hearing, HRX declined to provide interim funding on the terms of the Original Interim Funding Agreement on the grounds that it understood that at least some of the required funding could be provided instead from funds which it was hoped could be raised by operating subsidiaries within the Group. The JPLs and HRX therefore negotiated the terms of the Amended Interim Funding Agreement, which was entered into, subject to Grand Court sanction. By an order made administratively without a hearing, the Amended Interim Funding Agreement was sanctioned by the Grand Court, and became effective, on 23 June 2014. Pursuant to the Amended Interim Funding Agreement HRX made available interim funding of US$3 million. A copy of the June 2014 Order is located at Appendix 4 (June 2014 Order) of this Explanatory Statement.

 

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The July 2014 Order

By a further order made administratively without a hearing on 14 July 2014, the Grand Court sanctioned the retention of Lucid pursuant to the terms of the Information Agent Agreement, to provide issuer services and to engage such other professionals, advisers and services providers as may be required in connection with the promulgation of the Schemes. A copy of the July 2014 Order is located at Appendix 5 (July 2014 Order) of this Explanatory Statement.

The August 2014 Order

By a further order made at a hearing on 11 August 2014, the Grand Court sanctioned amendments to the RSAs and the Exit Funding Arrangements, including a commitment letter between LDK Solar and HRX pursuant to which HRX agreed to provide US$24 million to LDK Solar (comprising the HRX Exit Facility and the Working Capital Facility) and the LDK International Loan Agreement. A copy of the August 2014 Order is located at Appendix 6 (August 2014 Order) of this Explanatory Statement.

 

3. THE PURPOSE OF THE EXPLANATORY STATEMENT

As you may be aware, LDK Solar has been exploring ways to secure its financial position and the future of its business. Following extensive negotiations with the Ad Hoc Committee, being a representative group of the Senior Note Scheme Creditors, and a majority in terms of claims of the Preferred Obligation Scheme Creditors, LDK Solar, acting by the JPLs has now come to a decision that the Restructuring Proposal, as described in Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement, is in the best interests of those with an economic interest in LDK Solar and the Group.

The Directors have also concluded that the Restructuring Proposal is in the best interests of those with an economic interest in LDK Silicon and LDK Silicon Holding. The Directors of LDK Silicon and LDK Silicon Holding have also resolved that the JPLs act as agent for and on behalf of each of LDK Silicon and LDK Silicon Holding for the purposes of implementing the Schemes and the Restructuring Proposal.

It is proposed that the implementation of the Restructuring Proposal will involve (amongst other things):

 

  (a) the implementation of the Cayman Scheme, being a court approved scheme of arrangement in the Cayman Islands for LDK Solar and LDK Silicon pursuant to section 86 of the Companies Law;

 

  (b) the implementation of the Hong Kong Scheme, being a court approved scheme of arrangement in Hong Kong for LDK Solar, LDK Silicon and LDK Silicon Holding pursuant to section 673 of the Companies Ordinance;

 

27


  (c) the Chapter 11 Plan, being a filing by the US Senior Note Guarantors of voluntary petitions under Chapter 11 of Title 11 of the Bankruptcy Code in the Bankruptcy Court ; and

 

  (d) the Recognition Filing, being a petition under Chapter 15 of the Bankruptcy Code for recognition of the compromise and arrangement of the LDK Solar Cayman Scheme.

The Explanatory Statement, which is provided pursuant to Order 102, Rule 20(4)(e) of the Grand Court Rules and Section 166A of the Companies Ordinance, is distributed for the purpose of providing Scheme Creditors with all the information reasonably necessary to enable the Scheme Creditors to make an informed decision on whether to approve the Schemes. A short explanation of the reasons for the Restructuring Proposal and the proposed Schemes is included below, as part of this letter.

This letter also explains why the JPLs and the Directors consider the Schemes and the Restructuring Proposal to be in the best interests of those with an economic interest in the Scheme Companies, including the Scheme Creditors, and in the best interests of the employees, suppliers and customers of the Scheme Companies.

Jefferies has acted as financial adviser, and Sidley has acted as global legal adviser along with Campbells as the Cayman law adviser, to the Scheme Companies and the JPLs in relation to the Schemes and the Restructuring Proposal.

 

4. OVERVIEW OF THE RESTRUCTURING PROPOSAL

The RSAs

The JPLs have entered into the Senior Note RSA with Consenting Senior Note Scheme Creditors and the Preferred RSA with Consenting Preferred Obligation Scheme Creditors. The execution of these RSAs by LDK Solar (acting by its JPLs) was sanctioned by the Grand Court on 2 April 2014 and (as amended) on 11 August 2014.

As at the date of this Explanatory Statement, approximately 60% of the Senior Note Scheme Creditors with a value of RMB 991,340,000 of the total Senior Note Scheme Claims are bound by the terms of the Senior Note RSA. Further, 80% in number of the Preferred Obligation Scheme Creditors with a total value of 79.2% of the Preferred Obligation Scheme Claims are bound by the terms of the Preferred RSA.

The RSAs provide (amongst other things) that LDK Solar and its Subsidiaries agree to take all steps that are reasonably necessary to implement the Restructuring Proposal by no later than 30 September 2014, provided that such date shall automatically be extended to 14 November 2014 if LDK Solar shall have filed the Cayman Scheme with the Grand Court on or before 31 August 2014 and a further extension to no later than 31 December 2014 with the agreement of the Ad Hoc Committee and 2/3 majority of the Preferred Obligation Scheme Creditors. The terms of the RSAs are set out in more detail in Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement.

 

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The Restructuring Proposal

LDK Solar has prepared a Restructuring Proposal which has been approved by the JPLs and the Directors. This Restructuring Proposal includes various measures intended to ensure that the Group will be able to continue to operate on a going concern basis. As part of the Restructuring Proposal, the Schemes are proposed to give effect to a restructuring of the obligations of LDK Solar under the Senior Notes, which are governed by the laws of the State of New York, the Preferred Documents, which are governed by Hong Kong law and the claims of the Ordinary Scheme Creditors.

The commercial terms of the Restructuring Proposal (as documented in the Schemes) provide for (amongst other things):

Senior Note Scheme Creditors

The Claims of Senior Note Scheme Creditors shall be released in full and each Senior Note Scheme Creditor may choose to elect, in its Senior Note Capitalisation Request Form:

 

  (a) the Cash Option (if available) in order to receive the Senior Note Cash Out Amount (if available) in full and final satisfaction of its Claims. Further information on the Cash Option is set out in paragraph 13.1(a)(i) of Part 8 (Transaction Overview) of this Explanatory Statement; or

 

  (b) the Non-Cash Option in order to receive the Senior Note Non-Cash Scheme Consideration, comprising the Scheme Shares and the 2018 Convertible Bonds, in full and final satisfaction of its Claims. Further information on the Non-Cash Option is set out in paragraph 13.1(a)(i)(A) of Part 8 (Transaction Overview) of this Explanatory Statement.

A copy of the Capitalisation Request Form, along with a Distribution Confirmation Deed is included in the Senior Solicitation Packet. The Senior Solicitation Packet has also been made available to Senior Note Scheme Creditors on the Scheme Website.

Preferred Obligation Scheme Creditors

The Preferred Obligation Scheme Claims shall be released in full and each Preferred Obligation Scheme Creditor may choose to elect, in its Capitalisation Request Form:

 

  (c) The Cash Option (if available) in order to receive the Preferred Obligation Cash Out Amount (if available) in full and final satisfaction of its Claims. Further information on the Cash Option is set out in paragraph 13.3(a)(i) of Part 8 (Transaction Overview) of this Explanatory Statement; or

 

  (d) The Non-Cash Option to receive the Preferred Obligation Non-Cash Scheme Consideration, comprising the Scheme Shares and the Preferred Convertible Bonds in full and final settlement of its Claims. Further information on the Non-Cash Option is set out in paragraph 13.3(a)(ii) of Part 8 (Transaction Overview) of this Explanatory Statement.

 

29


A copy of the Capitalisation Request Form, along with a Distribution Confirmation Deed is included in the Preferred Solicitation Packet. The Preferred Solicitation Packet has also been made available to Preferred Obligation Scheme Creditors on the Scheme Website.

PLEASE NOTE: under the Schemes, LDK Solar will not be obliged to make available any funds to pay the Senior Note Cash Out Amount or the Preferred Obligation Cash Out Amount, and is only likely to do so if the JPLs are confident that there is sufficient finance available to pay both a Senior Note Cash Out Amount and a Preferred Obligation Cash Out Amount, as well as the Ordinary Creditor Cash Out Amount, and that it is appropriate in the circumstances to do so. Failure to provide the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount will not constitute any breach of the Schemes or the Restructuring Documents.

To the extent that LDK Solar does not provide the Senior Note Cash Out Amount or the Preferred Obligation Cash Out Amount, those Scheme Creditors will be deemed to have elected the Scheme Shares and an Agreed Share Ratio of 15% with the remainder of the Scheme Claim to be satisfied through the issuance of the Convertible Bonds, unless it has indicated a Fall Back Agreed Share Ratio in its Capitalisation Request Form, in which case such ratio will be used as its Agreed Share Ratio.

Ordinary Scheme Creditors

The Claims of Ordinary Scheme Creditors, including their Ordinary Scheme Claims, shall be released in full and each Admitted Ordinary Scheme Creditor may choose to elect in whole or in part:

 

  (e) The Cash Option to receive the Ordinary Cash Out Amount in full and final satisfaction of its Claims. Further information on the Cash Option is set out in paragraph 13.2(b) of Part 8 (Transaction Overview) of this Explanatory Statement; or

 

  (f) The Non-Cash Option to receive the Ordinary Non-Cash Scheme Consideration, comprising the Scheme Shares and the 2018 Convertible Bonds in full and final satisfaction of its Claims. Further information on the Non-Cash Option is set out in paragraph 13.3(a)(ii) of Part 8 (Transaction Overview) of this Explanatory Statement.

PLEASE NOTE: LDK Solar will be obliged under the Schemes to provide the Ordinary Cash Out Amount to Admitted Ordinary Scheme Creditors who elect the Cash Option. The Ordinary Cash Out Amount that LDK Solar is required to pay will be an amount in Dollars equal to the product of an Admitted Ordinary Scheme Creditor’s Ordinary Cash Amount and 0.05. However, the “Ordinary Cash Amount” will not necessarily equal the amount in respect of which an Admitted Ordinary Scheme Creditor elects the Cash Option, and will be adjusted downwards if the Scheme Supervisors determine that there is insufficient cash available to fund a distribution of five cents in the Dollar on all Admitted Ordinary Scheme Claims in respect of which creditors have elected the Cash Option.

A copy of the Capitalisation Request Form, along with a Distribution Confirmation Deed is included in the Ordinary Solicitation Packet at Appendix 14 (Ordinary Solicitation Packet) of this Explanatory Statement. A copy of the Ordinary Solicitation Packet has been made available to Ordinary Scheme Creditors on the Scheme Website.

 

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5. EFFECT OF THE SCHEME

The JPLs and the Directors believe that, as part of the Restructuring Proposal, the successful implementation of the Schemes will improve the capital structure of the Scheme Companies, reduce the debt burden of the Scheme Companies and allow the Scheme Companies to comply with their post-restructuring obligations and liabilities and to trade on a going concern basis.

 

6. WHOSE RIGHTS WILL BE ALTERED BY THE SCHEMES?

The Schemes will affect the rights of the Scheme Companies and Scheme Creditors only.

 

7. WHAT HAPPENS IF THE RESTRUCTURING PROPOSAL FAILS?

The JPLs and the Directors believe that should the Restructuring Proposal not proceed, the Scheme Companies would be unable to comply with their obligations under the Senior Note Indenture and the Preferred Documents. The Scheme Companies have limited available cash (sufficient only to fund the implementation of the restructuring and to meet ongoing operational costs during this period) and, if the Schemes should fail, would be unable to pay their debts from LDK Solar’s account under the control of the JPLs. The estimated recoveries in such scenario are described in the Liquidation Analysis. Unless the JPLs and the Directors are able to satisfy themselves that an alternative financial restructuring is likely to be successful, which the JPLs and the Directors consider very unlikely given the time and cost of the negotiation of the Restructuring Proposal, the JPLs and the Directors would make, or cause the Scheme Companies to make, an application to the Grand Court and/or the High Court to place the Scheme Companies into Official Liquidation or other appropriate insolvency proceedings. The cash and balance sheet position in such scenario is described in the Liquidation Analysis at Appendix 39 (Liquidation Analysis) to this Explanatory Statement.

 

8. FUNDING AND THE AVAILABILITY OF THE CASH OPTION

LDK Solar, and subsequently, the JPLs (for and on behalf of LDK Solar) have managed to secure various forms of funding to fund the provisional liquidation and pay the costs and expenses incurred in implementing the Restructuring Proposal. A summary of the terms of these interim funding arrangements is set out in paragraph 14.9(x) of Part 9 (Overview of the Group) to this Explanatory Statement.

Further, the JPLs have also managed to secure the Exit Funding Arrangements, as set out in paragraph 13.7 of Part 8 (Transaction Overview).

Other than the interim and Exit Funding Arrangements, LDK Solar to date has not been able to confirm any other available resources for satisfying the costs and expenses of the provisional liquidation, implementing the Restructuring Proposal, payment of the Cash Out Amounts and funding working capital expenses.

 

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As at the date of this Explanatory Statement, no funding has been secured by LDK Solar to finance the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount. The JPLs will not be taking any active steps to secure further funding, and as matters stand there is unlikely to be any cash available to fund the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount.

 

9. NYSE LISTING

As set out in this letter, the February 2014 Order authorised the JPLs to take all necessary and appropriate steps to retain the listing of the ADSs on the NYSE. A summary of the actions taken by the JPLs in respect of the listing of the ADSs on the NYSE is set out in paragraph 14.4 of Part 9 (Overview of the Group) of this Explanatory Statement.

 

10. THE DIRECTORS AND THE EFFECTS OF THE SCHEMES ON THEIR INTERESTS

The current members of the LDK Board, and the board composition of LDK Silicon and LDK Silicon Holding are listed in paragraph 14.12 in Part 9 (Overview of the Group).

The interests of the directors of the Scheme Companies, including in the share capital of the Scheme Companies are also set out in paragraph 14.13(a) and 14.13(e) in Part 9 (Overview of the Group) as at the date of this Explanatory Statement.

A description of the stock incentive arrangements for the directors and employees of the Scheme Companies is set out in paragraph 14.13(f) in Part 9 (Overview of the Group).

 

11. SHAREHOLDERS

The list of the material shareholders of LDK Solar as at the date of this Explanatory Statement is set out in paragraph 14.1(d) of Part 9 (Overview of the Group).

 

12. RISK FACTORS

LDK Solar and the Group of which it is a part, like many in the same industry in the current business environment, are faced with significant business risks. Since LDK Solar is the ultimate holding company of the Group, its financial condition and results of operations are necessarily affected by the operations and financial conditions of its Subsidiaries on a consolidated basis. In addition to the risks associated with the implementation of the Restructuring Proposal, the JPLs and the Directors have identified a number of factors that may affect the Group’s operating results, liquidity and financial condition. The JPLs and the Directors believe that the successful implementation of the Restructuring Proposal is a key step towards mitigating these risks and will allow the Group to focus on its operations and principal business activities.

The principal risk factors that the Group will likely face after the restructuring are set out in Part 10 (Risk Factors). However, those risk factors are not an exhaustive list of all the potential risks and uncertainties which may be involved.

 

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13. ACTIONS TO BE TAKEN

Meetings of Scheme Creditors

The Grand Court and the High Court have granted the relevant Scheme Companies permission to convene the following meetings for relevant Scheme Creditors to consider and if thought fit, approve the Schemes:

 

  (a) In respect of the Senior Note Scheme Creditors, the Senior Note Meetings;

 

  (b) In respect of the Preferred Obligation Scheme Creditors, the Preferred Obligation Meetings; and

 

  (c) In respect of the Ordinary Scheme Creditors, the Ordinary Meetings.

The Cayman Scheme Meetings, comprising the LDK Silicon CI Preferred Meeting, the LDK Solar CI Preferred Meeting, the CI Senior Note Meeting and the LDK Solar CI Ordinary Meeting, will be held at the offices of Campbells at Floor 4, Willow House, Cricket Square, George Town, Grand Cayman KY1-1103.

Once the Cayman Scheme Meetings have concluded, the Hong Kong Scheme Meetings, comprising LDK Solar HK Ordinary Meeting, LDK Silicon HK Preferred Meeting, LDK SH Preferred Meeting, HK Senior Note Meeting and the LDK Solar HK Preferred Meeting, will be held at Sidley’s Hong Kong offices at 39/F, Two International Finance Centre Central, Hong Kong.

Scheme Creditors who attend the Cayman Scheme Meetings will also be able to attend the Hong Kong Scheme Meetings, via video conference from Campbells’ offices. Similarly, Scheme Creditors who attend the Hong Kong Scheme Meetings will also be able to attend the Cayman Scheme Meetings, via video conference from Sidley’s Hong Kong offices. Scheme Creditors will also be able to dial into each of the Cayman Scheme Meetings and the Hong Kong Scheme Meetings using the LDK Dial-In Details.

Scheme Creditors should refer to Section 1 (Expected Timetable of Principal Events) of this Explanatory Statement to find out the specific times for each Scheme Class Meeting.

Voting at the Meetings

Scheme Creditors may vote at the meeting in person (or in the case of a corporation by a duly authorised representative) or by proxy, in each case, by completing the Account Holder Letter and Ballot, the CN Account Holder Letter or the Proxy Forms.

In order to vote on the Schemes and attend the Scheme Class Meetings, it is important that the Scheme Creditors ensure that they follow the voting instructions set out below and throughout this Explanatory Statement.

Senior Note Scheme Creditors

The Senior Solicitation Packet will be made available to Senior Note Scheme Creditors on the Scheme Website and at Appendix 12 (Senior Solicitation Packet). Details of the actions the Senior Note Scheme Creditors need to take are also set out in Part 4 (Senior Note Scheme Creditors) of this Explanatory Statement.

 

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This Senior Solicitation Packet includes (amongst other things):

 

  (a) The Account Holder Letter and Ballot, which allows the Senior Note Scheme Creditors to vote on the LDK Solar Cayman Scheme, the LDK Solar HK Scheme and the Chapter 11 Plan. As set out in more detail in Part 4 (Senior Note Scheme Creditors) and in the Senior Solicitation Packet, Senior Note Scheme Creditors should be aware that failure to submit a valid Account Holder Letter and Ballot will mean that the voting instructions contained in that Account Holder Letter and Ballot will be disregarded for the purposes of voting at the Senior Note Meetings and the Chapter 11 Plan and the relevant Senior Note Scheme Creditors will not be entitled to vote at the Senior Note Meetings or on the Chapter 11 Plan;

 

  (b) The Capitalisation Request Form, being Appendix 1 to the Account Holder Letter and Ballot, which Scheme Creditors are required to complete in order to make elections for the Cash Option and/ or the Non-Cash Option;

 

  (c) The Designated Recipient Form marked as Annex 1 to the Capitalisation Request Form, being a form that Scheme Creditors are required to complete in order to appoint a Designated Recipient to be the recipient of any or all of the Non-Cash Scheme Consideration that would otherwise be made available to a Qualifying Scheme Creditor; and

 

  (d) The Distribution Confirmation Deed marked as Annex 2 to the Capitalisation Request Form, being a deed that Scheme Creditors must complete in order to (amongst other things) (A) provide Settlement Instructions in respect of payment of the Cash Out Amount; and (B) confirm (amongst other things) that the Scheme Creditor or its Designated Recipient may legally and lawfully be issued the Non-Cash Scheme Consideration.

Preferred Obligation Scheme Creditors

The Preferred Solicitation Packet will be made available to Preferred Obligation Scheme Creditors on the Scheme Website and at Appendix 13 (Preferred Solicitation Packet). Details of the actions the Preferred Obligation Scheme Creditors need to take are also set out in Part 5 (Preferred Obligation Scheme Creditors) of this Explanatory Statement.

The Preferred Solicitation Packet includes (amongst other things):

 

  (a) The Preferred Proxy Form, which allows the Preferred Obligation Scheme Creditors to vote on the LDK Solar Cayman Scheme, the LDK Solar HK Scheme, the LDK Silicon Cayman Scheme, the LDK Silicon HK Scheme and the LDK SH HK Scheme; and

 

  (b) The Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Form.

 

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Ordinary Scheme Creditors

The Ordinary Solicitation Packet will be made available to Ordinary Scheme Creditors on the Scheme Website and at Appendix 14 (Ordinary Solicitation Packet). Details of the actions the Ordinary Scheme Creditors need to take are also set out in Part (Ordinary Scheme Creditors) of this Explanatory Statement and in the Ordinary Solicitation Packet.

The Ordinary Solicitation Packet is set out into the following three parts:

Part A of the Ordinary Solicitation Packet will include (amongst other things):

 

  (a) The CN Account Holder Letter, which is to only be completed by CN Holders. The CN Account Holder Letter allows CN Holders to vote on the LDK Solar Cayman Scheme and the LDK Solar HK Scheme. For the avoidance of doubt, all other Ordinary Scheme Creditors (including Restructured CN Holders) shall not complete the CN Account Holder Letter; and

 

  (b) The Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Form.

Part B of the Ordinary Solicitation Packet will include (amongst other things):

 

  (c) The Ordinary Proxy Form, which is to only be completed by Ordinary Scheme Creditors, other than CN Holders. The Ordinary Proxy Form allows all other Ordinary Scheme Creditors to vote on the LDK Solar Cayman Scheme and the LDK Solar HK Scheme; and

 

  (d) The Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Form.

Part C of the Ordinary Solicitation Packet will include the Claim Form, which is to be lodged by Ordinary Scheme Creditors in order to receive their entitlement to the Scheme Consideration. Instructions on completing the Claim Form are set out in Part 6 (Ordinary Scheme Creditors) of this Explanatory Statement, along with the Ordinary Solicitation Packet.

If a Senior Note Scheme Creditor or Preferred Obligation Scheme Creditor has elected the Cash Option and, as is expected, the Scheme Supervisors determine that no Senior Note Cash Out Amount or Preferred Obligation Cash Out Amount will be paid, that Scheme Creditor will be deemed to have elected to receive the Non-Cash Scheme Consideration.

As mentioned above, the amount of an Admitted Ordinary Scheme Creditor’s claim which is eligible for the Cash Option may also be adjusted downwards if there is insufficient funding available to pay a Cash Out Amount of five cents in the Dollar. To the extent that such downwards adjustments are made, that Admitted Ordinary Scheme Creditor will be deemed to have elected to receive the Non-Cash Scheme Consideration, subject to the limit on Ordinary Non-Cash Scheme Consideration not being reached or exceeded. If such limit is reached or exceeded, the amount of Non-Cash Scheme Consideration to be distributed to such creditors may also be restricted.

 

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No Scheme Creditor may receive the Non-Cash Scheme Consideration unless it submits a properly executed and completed Distribution Confirmation Deed and is entitled to receive such in accordance with any applicable law. A trust arrangement will be put in place as regards Non-Cash Scheme Consideration to which a Qualifying Scheme Creditor who is a Disqualified Person, a Prohibited Transferee or who has not completed a Distribution Confirmation Deed would otherwise be entitled to receive under the Schemes. Details in this respect are set out in Part 2 (Introduction to the Schemes) of this Explanatory Statement.

We would encourage all Scheme Creditors to start the process for submitting their votes for the Scheme Class Meetings as soon as possible.

 

14. RECOMMENDATION

For the reasons set out in the Explanatory Statement, the JPLs are reasonably satisfied that the Schemes will benefit the Scheme Creditors and the Directors consider the Restructuring Proposal to be in the best interests of the Scheme Creditors. Accordingly, the JPLs and the Directors recommend that Scheme Creditors vote in favour of the Schemes at the Scheme Class Meetings.

 

Yours faithfully

 

Tammy Fu

Joint provisional liquidator for and on behalf of

LDK Solar CO., Ltd. (in Provisional Liquidation)

 

for and on behalf of
LDK Silicon & Chemical Technology Co., Ltd.

 

for and on behalf of

LDK Silicon Holding Co., Limited

 

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5. COMMUNICATIONS POLICY

 

  (a) Senior Note Scheme Creditors and CN Holders

Account Holder Letters and Ballots and CN Account Holder Letters should be sent by email fax to be received before the Voting Instruction Deadline, being 11:00am (Cayman Islands time), 15 October 2014.

If by email (preferred), to:

ldk@lucid-is.com

Marked for the attention of David Shilson / Sunjeeve Patel.

If by fax, to:

+44 (0)20 7067 9098

Marked for the attention of David Shilson / Sunjeeve Patel.

If by mail to:

Lucid Issuer Services Limited

436 Essex Road

London

N1 3QP

United Kingdom

Marked for the attention of David Shilson / Sunjeeve Patel.

 

  (b) Preferred Obligation Scheme Creditors

Preferred Proxy Forms should be sent by email, courier or fax to be received before the Voting Instruction Deadline, being 11:00am (Cayman Islands time), 15 October 2014.

If by courier, to:

Zolfo Cooper (Cayman) Ltd

P.O. Box 776

10 Market Street

Camana Bay, Grand Cayman

Cayman Islands

KY1-9006

Marked for the attention of Iain Gow and Emma Storry.

If by fax, to:

+1 345 946 0082

Marked for the attention of Iain Gow and Emma Storry.

 

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If by email (in PDF format) to:

ldkenquiries@zolfocooper.ky, iain.gow@zolfocooper.ky, and to emma.storry@zolfocooper.ky.

Marked for the attention of Iain Gow and Emma Storry.

 

  (c) Ordinary Scheme Creditors (excluding the CN Holders)

Ordinary Proxy Forms should be sent by email, courier or fax to be received before the Voting Instruction Deadline, being 11:00am (Cayman Islands time), 15 October 2014.

If by courier, to:

Zolfo Cooper (Cayman) Ltd

P.O. Box 776

10 Market Street

Camana Bay, Grand Cayman

Cayman Islands

KY1-9006

Marked for the attention of Iain Gow and Emma Storry.

If by fax, to:

+1 345 946 0082

Marked for the attention of Iain Gow and Emma Storry.

If by email (in PDF format) to:

ldkenquiries@zolfocooper.ky, iain.gow@zolfocooper.ky, and to emma.storry@zolfocooper.ky.

Marked for the attention of Iain Gow and Emma Storry.

 

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PART 1

 

6. BACKGROUND TO THE SCHEMES AND THE CHAPTER 11 PLAN

 

6.1 Introduction

 

  (a) The business of the Scheme Companies and the Group is to manufacture and sell a variety of PV Products. Specifically, the Group produces polysilicon, monocrystalline and multicrystalline ingots, wafers, cells, modules, systems, power projects and solutions, which in turn facilitate the production of solar panels by the Group and other down-stream customers. Solar panels manufactured by Group Companies are then sold to the Group’s customers primarily via the Main Onshore Entities.

 

  (b) The Group also established the Offshore Operating Operations in order to access the international capital markets, to expand into the global PV markets, and to acquire PV operations outside of the PRC. The Group’s most notable offshore acquisitions consist of the Sunways Acquisition and the SPI Acquisition. Further information of the Group’s operations, including the Sunways Acquisition and the SPI Acquisition, are set out in paragraph 14.1 of Part 9 (Overview of the Group) of this Explanatory Statement.

 

  (c) In this Explanatory Statement, the use of the term “offshore” generally indicates operations, assets and activities outside of the PRC.

 

6.2 The Group’s deteriorating financial condition

 

  (a) As has been widely reported in the mainstream press, the solar power industry encountered significant financial challenges in the years 2011 to 2013 primarily as a result of (amongst other things) reduction in the price of solar panels and the declining price of polysilicon, a key raw material used to manufacture polycrystalline panels. In addition, as widely reported, in 2011, the European region accounted for nearly two thirds of new global installations. Up until that time, Europe had been a driving force in the global solar sector due to generous government subsidies which helped boost solar installations. However, the market witnessed setbacks due to the sovereign debt crisis and a scaling of subsidies in various European markets. In response to weaker demand, solar firms began scaling back on European operations.

 

  (b) Specifically, since 2011, the Group has been significantly impacted by over-capacity and reduced demand in the global PV market. The Group has encountered financial difficulties as a result of decreased market demand and depressed market prices for polysilicon. As set out in paragraph 14.2(c) of Part 9 (Overview of the Group), for the years ended 31 December 2011 and 2012, the Group produced approximately 10,455 metric tons and 2,520 metric tons of polysilicon, respectively. Further, in 2012, the Group suspended its polysilicon production due to significant operating losses as the Group’s cash cost for polysilicon production was (and remains) well above the market pricing while its PV Products were facing decreased market demand and depressed prices. In an effort to lower the Group’s production cost for polysilicon, the Group commenced the installation of hydrochlorination systems to two of its three production lines at the Mahong Plant in order to make them fully closed-loop production lines and to reduce production costs. The decreased market demand and depressed pricing for PV Products resulted in continuous pricing pressure throughout the value chain and culminated in a substantial market price reduction for solar power components.

 

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  (c) As illustrated in the table below, the average selling price per kilogram of polysilicon for the first quarter of 2011 was US$90.55. After the first quarter of 2011, the average selling price per kilogram of polysilicon significantly reduced to US$23.92 as at the second quarter of 2012, being the period from which the Group suspended its polysilicon production. In addition, as highlighted in the table below, sales in polysilicon as at the time the Group suspended its polysilicon operations in the second quarter of 2012 were US$14.5 million, having reached a high of US$76.1 million for the corresponding quarter in 2011.

 

     2012  
     Q2      Q1  

Sales (US$ millions)

     14.5         13.3   

ASP (US$ per kg)

     23.92         28.85   

Shipments (MT)

     608         462   

 

     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     24.3         35.7         76.1         8.6   

ASP (US$ per kg)

     37.24         52.15         67.33         90.55   

Shipments (MT)

     653         685         1,130         95   

Source: LDK Solar

The Group restarted one of the three production lines at its Mahong Plant in July 2014 with the existing STC thermal conversion system, and anticipates to test-run the hydrochlorination facilities in September 2014. Additional information on the Group’s operations are set out in Part 9 (Overview of the Group) of this Explanatory Statement.

 

  (d) Similarly, due to the ongoing deteriorating PV market condition and overall global economic slowdown, the Group also encountered challenges in manufacturing and selling solar wafers. As set out in the table overleaf, the average selling price of solar wafers for the first quarter of 2011 was US$0.84 per watt. From the first quarter of 2011, the average selling price of wafers came down to US$0.21 per watt as of the fourth quarter of 2013. For the first half of 2014, the average selling price of wafers ranged between US$0.22 and US$0.23 per watt. In addition, as illustrated in the table below, sales of solar wafers for the first quarter of 2011 were US$530.1 million. By the fourth quarter of 2013, sales of wafers had reduced to US$120.2 million. For the second quarter of 2014, the sales of wafers amounted to US$114.8 million.

 

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     2014  
     Q2      Q1  

Sales (US$ millions)

     114.8         126.2   

ASP (US$ per watt)

     0.22         0.23   

Shipments (MW)

     513         541   

 

     2013  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     120.2         81.1         66.7         54.4   

ASP (US$ per watt)

     0.21         0.21         0.22         0.23   

Shipments (MW)

     567         385         304         240   
     2012  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     45.6         68.2         79.9         58.8   

ASP (US$ per watt)

     0.25         0.30         0.25         0.36   

Shipments (MW)

     185         230         317         164   
     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     77.6         145.7         282.3         530.1   

ASP (US$ per watt)

     0.39         0.50         0.66         0.84   

Source: LDK Solar

 

  (e) Additionally, the Group had initially intended to (i) develop a LED sapphire wafer manufacturing facility in Nanchang City, Jiangxi Province; (ii) add units to its existing polysilicon production facilities at Mahong Plant; and (iii) to establish a new manufacturing line to produce silane gas at its Mahong polysilicon production plant. These plans were halted due to the deteriorating PV market conditions. Further information on the levels of production and output for the Group’s polysilicon, solar cells, wafers, modules and solar farm operations are set out in Part 9 (Overview of the Group) of this Explanatory Statement.

 

  (f) The impact of the reduced demand for PV Products and the scaling back of subsidies in various European markets has had a material adverse impact on the Group’s operational performance and resulted in the deterioration of the Group’s financial performance. In response to these adverse market conditions, the Group was forced to reduce production and in some instances suspend the operations of certain plants. Further information on the steps taken by the Group to manage its financial difficulties is set out at paragraph 6.3 to 6.4 of this Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement.

 

6.3 Actions taken by LDK Solar and the JPLs

 

  (a) In response to the Group’s deteriorating financial condition, LDK Solar appointed the LDK Advisers on 12 September 2013, comprising Jefferies (to act as its financial adviser), Sidley (as global legal adviser) and Campbells (as Cayman Islands legal adviser) to review its options (including as to process and any sources of financing) with respect to the repayment of the Scheme Claims.

 

  (b) LDK Solar’s senior management developed projections for the Group’s Onshore Operations as a going concern for the fiscal years ending 31 December 2014 to 31 December 2018, and which was updated in August 2014 for the fiscal years ending 31 December 2015 to 31 December 2019. Based on these projections, Jefferies performed the financial modelling and prepared the Onshore Business Plan. In addition, as set out below, the LDK Advisers have assisted LDK Solar, and following their appointment, the JPLs, in negotiating the terms of the Restructuring Proposal with the Scheme Creditors.

 

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Senior Note Scheme Creditors

 

  (c) On or around 28 August 2013, LDK Solar postponed the payment of interest due and payable to the Senior Note Scheme Creditors so that the directors of LDK Solar could evaluate and determine the most appropriate course of action. As a result, LDK Solar, Sidley and Jefferies approached a number of Senior Note Scheme Creditors with significant holdings in the Senior Notes with a view to discussing LDK Solar’s options with respect to the repayment of the Senior Notes.

 

  (d) On or around 28 September 2013, LDK Solar entered into a standstill agreement with holders holding a majority in aggregate principal amount of the Senior Notes whereby those holders agreed to (amongst other things) withhold from commencing enforcement action under the Senior Note Indenture. This standstill agreement was extended on a rolling basis until 27 February 2014. As set out in the Scheme Launch Letter, the JPLs were appointed by the Grand Court on 27 February 2014.

 

  (e) In order to facilitate the process of exploring restructuring options, the Ad Hoc Committee, comprising holders of approximately 49% of the principal amount outstanding of the Senior Notes, was formed at LDK Solar’s request in order to establish an effective process for commencing restructuring discussions.

 

  (f) The Ad Hoc Committee appointed the Ad Hoc Committee Advisers comprising Houlihan (as its financial adviser), R&G (as its global legal adviser) and Harneys (as its Cayman Islands legal adviser). Following their appointment, the Ad Hoc Committee Advisers held discussions with the Senior Note Scheme Creditors to gather their views and priorities.

 

  (g) As is customary in such discussions concerning the terms of a proposed restructuring, the Ad Hoc Committee Advisers were given access by LDK Solar to non-public price sensitive information located in the Dataroom, provided that the members of the Ad Hoc Committee Advisers who sought access to the Dataroom signed up to a confidentiality agreement. LDK Solar did not give the holders of Senior Notes any non-public price sensitive information because they were concerned not to become restricted from trading in the Senior Notes. Accordingly, the negotiations concerning a restructuring were initially carried out between the LDK Advisers and the Ad Hoc Committee Advisers.

 

  (h) Financial due diligence by Jefferies and Houlihan on the Group commenced in September 2013 and extensive negotiations commenced on the restructuring proposal between the LDK Advisers and the Ad Hoc Committee Advisers in late September 2013. On 24 September 2013 LDK Solar, along with Sidley and Jefferies, had a meeting with certain representatives of the Ad Hoc Committee along with R&G at the offices of Sidley. Further follow up meetings were held on 17 December 2013 and 17 February 2014 between LDK Solar, Sidley, Jefferies, the Ad Hoc Committee and the Ad Hoc Committee Advisers.

 

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  (i) Under the terms of the Senior Note Indenture, 25% of the holders of the Senior Notes may instruct the Senior Note Trustee under the Senior Notes to issue a notice of acceleration on LDK Solar. However, the holders of a majority of the Senior Notes (i.e. 50.1%) may, after the Senior Note Trustee has issued a notice of acceleration, instruct the Senior Note Trustee to rescind and cancel the notice of acceleration. LDK Solar had the benefit of this protection up until the maturity date of the Senior Notes, being 28 February 2014. Once the Senior Notes matured, any dissident holder of the Senior Notes would have been in a position to commence enforcement action against LDK Solar in accordance with the terms of the Senior Note Indenture.

 

  (j) In order to obtain the benefit of a moratorium and have sufficient time to negotiate the terms of a restructuring support agreement without risk of any dissident holder of the Senior Notes commencing any adverse action against LDK Solar, LDK Solar filed an application with the Grand Court on 21 February 2014 seeking orders from the Grand Court for the appointment of the JPLs as joint provisional liquidators of LDK Solar. On 27 February 2014, the JPLs were appointed by order of the Grand Court.

 

  (k) As a result of their appointment, the JPLs, from their offices in the Cayman Islands and with the assistance of LDK Solar’s management and the LDK Advisers, took control of these negotiations with the Senior Note Scheme Creditors. Pursuant to the February 2014 Orders, the JPLs were not authorised to cause or permit LDK Solar to enter into any restructuring support agreements with any of its holders of the Senior Notes or the Preferred Obligations without prior sanction of the Grand Court.

 

  (l) The JPLs and the Ad Hoc Committee Advisers agreed in principle the terms of the Restructuring Proposal, documented in a proposed restructuring support agreement, which was signed on 28 March 2014 by approximately 60% (by value) of the Senior Note Scheme Creditors (subject to sanction from the Grand Court). On 2 April 2014, the Grand Court authorised the JPLs to cause LDK Solar to enter into the Senior Note RSA. Further, on 11 August 2014, the Grand Court sanctioned the JPLs to enter into certain amendments to the Senior Note RSA. A summary of the terms of the Senior Note RSA, as amended, is set out in paragraph 6.4 below.

Preferred Obligation Scheme Creditors

 

  (m) On or about 28 June 2012, Apollo, an investment fund affiliated with Bank of China Limited, issued a notice of redemption to (amongst others) LDK Solar and LDK Silicon alleging certain breaches under the Preferred Documents and requiring LDK Solar and LDK Silicon to (amongst other things) redeem and/or purchase the Preferred Obligations held by Apollo for the redemption amount of US$64,402,382.92.

 

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  (n) On or about 29 June 2012, Excel Rise and Prosper East, investment funds affiliated with China Construction Bank Corporation, also issued notices of redemption to (amongst others) LDK Solar and LDK Silicon alleging certain breaches under the Preferred Documents and requiring LDK Solar and LDK Silicon to (amongst others) redeem and/or purchase the Preferred Obligations held by Excel Rise and Prosper East for the redemption amount of US$38,788,422.64 and US$12,929,474.21, respectively. On 6 January 2014, Excel Rise entered into a deed of assignment with New Lane, an investment fund also affiliated with China Construction Bank Corporation, and transferred 15,000,000 Preferred Obligations to New Lane.

 

  (o) No further action has been taken by Apollo, Excel Rise or Prosper East under the Notices of Redemption against LDK Solar, LDK Silicon or any of the Preferred Obligors, save for the commencement by Apollo of the Peng Proceedings which are set out in further detail in paragraph 14.14(a) of Part 9 (Overview of the Group).

 

  (p) Prior to the date of appointment of the JPLs, LDK Solar had been in private discussions with each holder of the Preferred Obligations concerning the terms of the proposed restructuring. Although Apollo eventually decided to hold separate negotiations with LDK Solar upon its commencement of the Peng Proceedings, the other holders of the Preferred Obligations, CDB International, a wholly owned subsidiary of CDB, Excel Rise, New Lane and Prosper East continued their discussions with LDK Solar’s management. On their appointment, the JPLs, from their offices in the Cayman Islands, took over these negotiations and met with certain members of the holders of the Preferred Obligations in Hong Kong on 11 March 2014. The JPLs and holders of a majority of the Preferred Obligations agreed the terms of the proposed restructuring, to be documented in a proposed restructuring support agreement, which was signed on 28 March 2014 by four of the five Preferred Obligation Scheme Creditors with a total value of 79.2% of the Preferred Obligation Scheme Claims (subject to sanction from the Grand Court).

 

  (q) On 2 April 2014, the Grand Court authorised the JPLs to cause LDK Solar to enter into the Preferred RSA. On 11 August 2014, the Grand Court sanctioned certain amendments to the Preferred RSA. Further details on the terms of the Preferred RSAs (as amended) are set out below in paragraph 6.4 of this Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement.

Ordinary Scheme Creditors

 

  (r) A number of other creditors have asserted claims against LDK Solar and various members of the Group. A summary of these claims and the status of discussions held with these creditors are set out below.

Sunways

 

  (s) LDK Solar indirectly holds a 71% shareholding in Sunways, a German-based manufacturer and supplier of solar energy components. Sunways (together with its wholly-owned subsidiary, Sunways Production) provided silicon-based solar cells, inverters, solar modules and solar systems. Sunways designed, developed and served as general contractor for solar energy installations.

 

44


  (t) Sunways claimed that LDK Solar was obliged to provide Sunways, upon written request, with adequate financial means to avoid any over-indebtedness and illiquidity.

 

  (u) On 17 March 2014, the JPLs received the Demand Letter from Sunways requesting that LDK Solar (i) pay Sunways an amount of €7 million to address its immediate liquidity problem, (ii) procure a waiver of the Group’s intercompany loans and trade payables in the amount of €35 million, and (iii) resolve to provide to Sunways an additional amount of €20 million in cash. The letter purported to require each of these steps to be taken before 19 March 2014.

 

  (v) Prior to the receipt of the Demand Letter, the JPLs engaged their German affiliate, TMP to perform a high-level review of Sunways and its subsidiaries in order to enable the JPLs to understand Sunways’ current financial situation. TMP provided a report to the JPLs, which concluded that Sunways’ liquidity issues were such that its directors were required to immediately file for bankruptcy under German insolvency law.

 

  (w) In response to the Demand Letter, the JPLs sought confirmation as to whether any interested investors had the ability to provide sufficient liquidity to Sunways within the timeframe available. The JPLs were advised by the Group’s management that whilst external investors remained interested in Sunways (see the below paragraph), it would take approximately three weeks for them to be able to provide liquidity, and so it was not possible for the JPLs to offer alternative solutions to Sunways prior to 19 March 2014. Accordingly, the JPLs sent a letter to Sunways on 19 March 2014 stating that LDK Solar was not in a position to comply with the Demand Letter.

 

  (x) Shortly after their appointment, the JPLs were provided with the terms of a draft restructuring investment agreement to be entered into between Sunways and a potential investor. The terms of the draft investment agreement were supported by the board of directors of Sunways. However, before the JPLs had an opportunity to fully consider the terms of this investment agreement and the report received from TMP on Sunways’ current financial situation, the Demand Letter was received and there was insufficient time for the potential investor and Sunways to implement the terms of the proposed investment agreement.

 

  (y) As a consequence of the JPLs’ position, Sunways filed for preliminary insolvency proceedings in Germany on 21 March 2014.

 

  (z) The JPLs have been in regular contact with the German Trustees, who were initially appointed as preliminary insolvency administrator. The German Trustees have submitted a proof of claim dated 25 March 2014 claiming an amount of €55 million against LDK Solar.

 

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  (aa) The German court opened formal insolvency proceedings on 28 April 2014 and the German Trustees were appointed as insolvency administrator. The German Trustees have indicated to the JPLs based on a summary of the proposed Schemes, that they in principle are supportive of the Scheme.

The CNs & the Restructured CN Loans

 

  (bb) Pursuant to the terms of the CN Indentures, LDK Solar issued US$400 million in convertible senior notes to certain CN Holders. In addition, it was also a term of the CN Indentures (amongst others) that the CNs were to mature on the CN Maturity Date, being 15 April 2013.

 

  (cc) On the CN Maturity Date, LDK Solar reached a settlement with a number of the CN Holders holding an aggregate principal amount of approximately US$22,177,000 as at 30 September 2013 out of a total amount of CNs outstanding of US$23,793,000 through:

 

  (i) a partial payment of cash; and

 

  (ii) entering into new unsecured obligations for an aggregate principal amount of US$3,200,680 in order to postpone and reschedule the repayment of certain remaining indebtedness (the “Restructured CN Loans”).

 

  (dd) As at 21 February 2012, the cumulative amount of US$4,934,143 was owing under the Restructured CN Loans (including the CAI loan referred to below). Further information on the Restructured CN Loans is set out in paragraph 14.9(t) of Part 9 (Overview of the Group) of this Explanatory Statement.

 

  (ee) As at the date of this Explanatory Statement, LDK Solar, and subsequently the JPLs have not yet been able to identify the remaining CN Holders who held an aggregate principal amount of approximately US$1,616,000 at September 2013.

The CAI Proceedings

 

  (ff) On 8 April 2014, CAI (a former investor and holder of CNs) obtained a summary judgment against LDK Solar in the High Court for an amount of US$1,164,245 plus interest and costs. The claim of CAI in the CAI Proceedings related to the remaining indebtedness due under the CNs refinanced by LDK Solar (as borrower) and CAI (as lender) pursuant to the terms of the CAI Loan (being one of the Restructured CN Loans). Whilst the High Court was prepared to make an order for summary judgment in favour of CAI, the High Court, in light of the appointment of the JPLs, held it was appropriate for a stay of execution to be granted until 31 August 2014, with liberty to apply for further extensions, pending the outcome of the LDK Solar’s proposed restructuring.

 

  (gg) On 29 August 2014, the JPLs filed a summons with the High Court seeking an extension of the existing stay of execution of CAI’s judgment on the basis that the JPLs intended to launch the Cayman Scheme on the same day, and the Hong Kong Scheme within seven to 14 days thereafter. On 2 September 2014, the High Court ordered that the stay of execution of CAI’s judgment be continued until 31 December 2014 with liberty to apply for further extensions. CAI was awarded its costs in relation to this application.

 

46


Tokyo Rope Claim

 

  (hh) Tokyo Rope issued an arbitration notice against LDK Solar dated 7 May 2014, in respect of a dispute concerning the Contract for the sale and purchase of the Machines. Tokyo Rope, the seller of the Machines, has alleged that LDK Solar has not made payments in respect of the purchase price for the Machines, and as such claims that the non-performance of LDK Solar in respect of its obligations under the Contract, has led Tokyo Rope to suffer loss and damages in the amount of Japanese Yen 2,952,000,000 (approximately US$28,800,000). Tokyo Rope therefore, has, in accordance with the terms of the Contract, given notice for the dispute to be resolved by way of arbitration, before the Hong Kong International Arbitration Centre.

 

  (ii) LDK Solar intends to dispute this claim on the following grounds (among others): (i) it is not the appropriate defendant to this claim since it is alleged that the Contract was between Jiangxi LDK Solar and Tokyo Rope. The legal department of the Group, in consultation with its outside PRC legal advisor, believes that Jiangxi LDK Solar should be the respondent to Tokyo Rope’s arbitration notice. Jiangxi LDK Solar sent a notice to such effect to the Hong Kong International Arbitration Centre on 28 August 2014; and (ii) Tokyo Rope has not provided the Machines. The parties are currently in talks regarding the choice of arbitrator and adoption of arbitration rules.

Claims to be excluded from the Schemes

 

  (jj) In addition to the claims of the Ordinary Scheme Creditors set out in paragraph 6.3(r) to paragraph 6.3(ii) above, there are a number of potential claims asserted against the Scheme Companies which are to be excluded from the Schemes. These claims are set out below.

The Munich Re Claim

 

  (kk) The Munich Re Companies entered into the Stipulated Judgment against the Munich Re Defendants on 31 July 2012. The claim of the Munich Re Companies relates to a policy of insurance covering the performance warranty of certain PV modules that the Munich Re Defendants manufactured and sold between 1 January 2010 and 6 January 2010.

 

  (ll) Pursuant to the Stipulated Judgment, the Munich Re Defendants are liable to the Munich Re Companies, on a joint and several basis, to pay the Judgment Debt. Interest is accruing on the Judgment Debt at the rate of 10% per annum commencing from the date of the Stipulated Judgment.

 

  (mm) A payment of US$1,200,000 was made to Munich Reinsurance Company on 11 December 2012 by LDK Solar Europe. A proof of debt dated 26 March 2014 was lodged with the JPLs by the Munich Re Companies for an amount of US$13,096,748, consisting of (i) a principal sum of US$11,534,467; and (ii) accrued interest, compounded monthly for 1 year and 5 months at a rate of 9%, of US$1,562,281.

 

47


  (nn) Following negotiations between the JPLs and the Munich Re Companies the commercial terms of a settlement between the Munich Re Companies and the Munich Re Defendants was agreed, subject to contract. The Munich Re Companies and the Munich Re Defendants intend to enter into an agreement containing ordinary and customary compromise and settlement provisions in respect of the Munich Re Companies’ claims, such agreement to be effective upon execution (subject to court sanction) and conditional only upon the occurrence of the Effective Date.

Project Loan Claim

 

  (oo) LDK Solar also entered into four acquisition and project loans as borrower. These loans are set out in further detail at paragraph 14.9(u) of Part 9 (Overview of the Group) of this Explanatory Statement.

Project Guarantee Claim

 

  (pp) LDK Solar also granted an unsecured guarantee in favour of CDB concerning LDK Solar Europe’s obligations under various project financing loans. These loans are set out in further detail at paragraph 14.9(v) of Part 9 (Overview of the Group) of this Explanatory Statement.

Employee Claims

 

  (qq) The JPLs have received proofs of debt from two former employees of LDK Silicon. These former employees were employed by LDK Silicon and signed a written employment contract with LDK Silicon, but allege that they provided services to LDK Solar and signed a confidentiality and non-compete agreement with LDK Solar. The former employees allege that LDK Silicon and LDK Solar breached their obligations under the employment contracts and confidentiality and non-compete agreements such that those companies are liable to pay damages to each of the employees in the respective amounts of US$902,898 and US$1,791,573 (before interest and legal fees). The Directors dispute such claims.

Intercompany Claims

 

  (rr) As set out in paragraph 14.11 of Part 9 (Overview of the Group), the Group has substantial intercompany receivable and payable balances owing between different entities within the Group, including the Scheme Companies. With the exception of the claim asserted by Sunways (as described in paragraph 6.3(s) to 6.3(aa)), the Intercompany Claims against the Scheme Companies will remain unimpaired under the Schemes. As set out in paragraph 14.11, once the Schemes become effective, KPMG will be tasked with working with management and the JPLs to establish the most appropriate process to rationalise and clean up the Group’s intercompany receivable and payable balances.

 

48


6.4 The RSAs

 

  (a) The Consenting Senior Note Scheme Creditors and the Consenting Preferred Obligation Scheme Creditors have agreed to be bound by the terms set out in paragraph 6.4(f) below, under the Senior Note RSA and the Preferred RSA respectively. The terms of the Senior Note RSA and the Preferred RSA are materially identical, save for as set out below.

 

  (b) Under the terms of the Senior Note RSA and the Preferred RSA, Senior Note Scheme Creditors and Preferred Obligation Scheme Creditors were not offered any inducements in terms of any consent fee for signing up to the terms of these RSAs. LDK Solar did however agree to pay certain legal and other professional costs and expenses incurred by the Ad Hoc Committee.

 

  (c) Under the RSAs, the claims of both the Preferred Obligation Scheme Creditors and the Senior Note Scheme Creditors were determined as at 3 June 2013, which included the principal amount owing under the Senior Note Indenture and the Preferred Documents (as applicable), plus accrued interest as at 3 June 2013. The RSA provides that interest continues to accrue on these claims from 4 June 2013 at 5.535% per annum.

 

  (d) The RSAs became effective and binding on 2 April 2014, on which date:

 

  (i) LDK Solar had received duly executed signature pages for the RSAs from (A) the Senior Note Scheme Creditors and the Preferred Obligation Scheme Creditors forming a majority of approximately 60% in aggregate principal amount of the Senior Notes currently outstanding and a majority of approximately 79% in aggregate value of the Preferred Obligations respectively; (B) Consenting Shareholders (as defined therein) holding at least a majority of the Shares; and (C) the JPLs; and

 

  (ii) the Grand Court sanctioned the entry by LDK Solar acting by the JPLs into the RSAs in accordance with the April 2014 Order.

 

  (e) Further, on 11 August 2014 the Grand Court sanctioned the entry by LDK Solar acting by the JPLs into the amended RSAs, in accordance with the August 2014 Order.

 

  (f) The RSAs (as amended) provide that a Consenting Senior Note Scheme Creditor and a Consenting Preferred Obligation Scheme Creditor will (amongst other things):

 

  (i) support the JPLs in connection with facilitating or implementing the terms of the Restructuring Proposal;

 

  (ii) support the Cayman Scheme;

 

  (iii) in the case of the Senior Note Scheme Creditors, support the Chapter 11 Plan;

 

  (iv) support the Recognition Filings;

 

49


  (v) support any filings and/or petitions by LDK Solar and/or its affiliates in such and/or other jurisdictions (including without limitation Hong Kong) as may (in the opinion of the JPLs, acting reasonably) be required to implement the Restructuring Proposal, including without limitation in relation to such other schemes of arrangement or other compromise or arrangement proceedings as may (in the opinion of the JPLs, acting reasonably) be required to implement or give effect to the Restructuring Proposal;

 

  (vi) standstill and forebear from exercising its enforcement rights under, in the case of Senior Note Scheme Creditors , the Senior Note Indenture, or in the case of the Preferred Obligation Scheme Creditors, the terms and conditions of the Preferred Documents;

 

  (vii) not directly or indirectly propose or support (amongst other things) any alternative proposal or offer from any person or entity in respect of the Restructuring Proposal other than what is contemplated in the Restructuring Proposal and the Restructuring Transactions;

 

  (viii) subject to the receipt by such Consenting Senior Note Scheme Creditor of the Cayman Scheme, the Explanatory Statement, the Chapter 11 Plan (including all solicitation materials) reflecting the terms of the arrangements set out in the Restructuring Proposal, (A) attend the Senior Note Meetings by proxy or in person and cast all of its votes in respect of its Senior Note Scheme Claim in favour of the Cayman Scheme; and (B) vote (in person or by proxy), all of its Scheme Claims against LDK Solar and US Senior Note Guarantors, to accept the Chapter 11 Plan; and

 

  (ix) subject to the receipt by such Consenting Preferred Obligation Scheme Creditor of the Cayman Scheme and the Explanatory Statement, attend the Preferred Obligation Meetings by proxy or in person and cast all of its votes in respect of its Preferred Obligation Scheme Claim in favour of the Cayman Scheme.

 

  (g) The RSAs provide that LDK Solar and its Subsidiaries agree to take all steps that are reasonably necessary to implement the Restructuring Proposal by no later than 30 September 2014, provided that such date shall automatically be extended to 14 November 2014 if LDK Solar shall have filed the Cayman Scheme with the Grand Court on or before 31 August 2014. In particular, LDK Solar and its Subsidiaries agree to (amongst other things) take the following steps:

 

  (i) support the JPLs in connection with facilitating or implementing the terms of the Restructuring Proposal;

 

  (ii) support the Cayman Scheme, the Chapter 11 Plan and the Recognition Filing;

 

  (iii) support any filings and/or petitions by LDK Solar and/or its affiliates in such and/or other jurisdictions as may (in the opinion of the JPLs, acting reasonably) be required to implement the Restructuring Proposal;

 

50


  (iv) not directly or indirectly propose or support (amongst other things) any alternative proposal or offer from any person or entity in respect of the Restructuring Proposal other than what is contemplated in the Restructuring Proposal and the Restructuring Transactions;

 

  (v) support LDK Solar and its Subsidiaries in securing, and not object to, the Interim Facility (as defined therein) and take such steps as may be required to procure the Interim Facility and the Exit Facility (each as defined therein);

 

  (vi) use its reasonable best efforts to maintain the listing of the ADSs on the NYSE at all times;

 

  (vii) in the case of the Senior Note Scheme Creditors, comply with the terms of the engagement letter among LDK Solar, certain of its Subsidiaries, certain holders of Senior Notes and Houlihan dated 24 October 2013 and the letter agreement among LDK Solar and R&G dated 24 October 2013, and pay the reasonable fees and disbursements of counsel in the Cayman Islands selected by the Ad-Hoc Committee; and

 

  (viii) not acquire or dispose of, or create an encumbrance over any material asset, incur any material liability, obligation or expense, issue any securities or enter into, amend or terminate a material agreement, or agree to do any of the foregoing, in each case other than (A) as contemplated in the Restructuring Proposal or (B) in the ordinary course of business on arm’s length terms.

 

  (h) The RSAs contemplate that the Cayman Scheme and, in the case of the Senior Note Scheme Creditors, the Chapter 11 Plan, will include (amongst other things):

 

  (i) a full and mutual release from liability by and from LDK Solar and its Subsidiaries, the Senior Note Scheme Creditors and the Preferred Obligation Scheme Creditors, the shareholders of LDK Solar and their respective Subsidiaries; and

 

  (ii) a full release from liability of the JPLs (including a release of any subsequently appointed joint provisional liquidator of LDK Solar);

and in respect of (i) and (ii) above, the current and former direct and indirect affiliates, equity holders, members, managing members, officers, directors, employees, advisors, principals, attorneys, professional advisors, accountants, investment bankers, consultants, agents, and other representatives (including their respective affiliates), in favour of each other, from any and all claims or causes of action, known or unknown, relating to any acts or omissions arising on or prior to the effective date of the Cayman Scheme with respect or relating to the Senior Notes, and Scheme Shares, except for any claims or causes of action relating to illegality, gross negligence or wilful misconduct.

 

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Scheme Creditors are directed to refer to Paragraph 7.16(ll) of Part 2 (Introduction to the Schemes) on the releases contained in the Schemes, which differ in certain respects from those releases set out in the RSAs.

 

  (i) The RSAs also provide that the releases referred to in 6.4(h) above shall include any inter-company liabilities of LDK Solar and its Subsidiaries to the extent relating to Senior Note Scheme Creditors and the Preferred Obligation Scheme Creditors.

 

  (j) The RSAs also provide that either of the RSAs will terminate immediately upon the occurrence of any of the following events (amongst others):

 

  (i) execution of a written agreement by and among the parties to each of the Senior Note RSA and the Preferred RSA terminating that RSA;

 

  (ii) the occurrence of any breach of the RSAs by a Consenting Senior Note Scheme Creditor (in respect of the Senior Note RSA) and a Consenting Preferred Obligation Scheme Creditor (in respect of the Preferred RSA), (to the extent not otherwise cured or waived);

 

  (iii) in the case of the Senior Notes, any of the Chapter 11 Cases being dismissed without the consent of the Ad-Hoc Committee or converted to a Chapter 7 Proceeding, or a Chapter 11 trustee with plenary powers or an examiner with enlarged powers relating to the operation of the businesses of LDK Solar and the Subsidiaries being appointed in any of the Chapter 11 Cases; or

 

  (iv) the occurrence of the Longstop Date (as defined in the RSAs and the same as the Scheme Longstop Date).

 

  (k) The Consenting Senior Note Scheme Creditors and the Consenting Preferred Obligation Scheme Creditors also have additional termination events under their respective RSAs, including but not limited to:

 

  (i) except for the appointment of the JPLs, or for the purposes of implementing the Restructuring Proposals, a petition for the winding up or liquidation (or other analogous order in any jurisdiction) of LDK Solar or certain material group companies (as specified therein) is presented and is not withdrawn or dismissed within 45 days;

 

  (ii) except for the appointment of the JPLs, or for the purposes of implementing the Restructuring Proposal, LDK Solar or certain material group companies (as specified therein) becomes subject to the appointment of an administrator, a liquidator, provisional liquidator, conservator, receiver, trustee, custodian or similar official for it or all or substantially all of its assets, or has a secured party take possession of all or substantially all of its assets, and such appointment or action is not withdrawn or dismissed within 45 days;

 

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  (iii) the occurrence of any breach of the RSAs by LDK Solar or its Subsidiaries (to the extent not otherwise cured or waived in accordance with the terms of the RSAs);

 

  (iv) the making of any amendment to or modification of, or the filing of any pleading by LDK Solar or any of its Subsidiaries that seeks to amend or modify, the Cayman Scheme, or in the case of the Senior Note Scheme Creditors, the Chapter 11 Plan, which amendment, modification or filing is materially inconsistent with the RSA not otherwise consented to;

 

  (v) the failure of LDK Solar to schedule with the Grand Court an initial convening hearing in respect of the Cayman Scheme to take place on or before the Scheme Longstop Date; or

 

  (vi) in the case of the Senior Note Scheme Creditors , the failure of LDK Solar and its Subsidiaries to meet any fee obligations or the termination of the fee letters.

 

  (l) The above is a summary only of the principal terms of the Senior Note RSA and the Preferred RSA made available to the Senior Note Scheme Creditors and the Preferred Obligation Scheme Creditors.

 

6.5 Consequences of failure to implement the Restructuring Proposal

 

  (a) The JPLs and the Directors believe that, should the Restructuring Proposal not proceed, the Scheme Companies would be unable to comply with their obligations under the Senior Note Indenture and the Preferred Documents which is likely to result in the Senior Note Scheme Creditors and the Preferred Obligation Scheme Creditors pursuing enforcement action against the Scheme Companies in respect of their outstanding obligations. In that event unless the JPLs and the Directors are able to satisfy themselves that an alternative financial restructuring is likely to be successful, which the JPLs considers very unlikely given the negotiations and effort made in respect of the Restructuring Proposal and the lack of available funding, the JPLs and the Directors would be required to make or cause the Scheme Companies to make an application to the Grand Court and/or the High Court (as applicable) to place the Scheme Companies and certain other Group Companies into Official Liquidation or other appropriate insolvency proceedings in order to facilitate an orderly winding up and realisation of the assets of the Scheme Companies for the benefit of creditors of each of the Scheme Companies.

 

  (b) In order to enable the JPLs to be reasonably satisfied that the Schemes and Restructuring Proposal are reasonably likely to benefit the creditors of LDK Solar, and for the Directors to form a view that the Schemes and the Restructuring Proposal are in the best interests of the creditors of LDK Silicon and LDK Silicon Holding, the JPLs and the Directors considered all relevant information available to them, including obtaining appropriate legal and financial advice. This included instructing Jefferies to prepare the Liquidation Analysis. The Liquidation Analysis comprises an illustrative analysis of the possible outcomes for Scheme Creditors in the event that the Restructuring Proposal is not implemented, resulting in a hypothetical liquidation of LDK Solar and consequent insolvency filings by various of its Subsidiaries in their respective jurisdictions. Any reference in this Explanatory Statement to the Liquidation Analysis is a summary only. The outputs, methodology and key assumptions underpinning the Liquidation Analysis are set out in more detail in 39 (Liquidation Analysis) of this Explanatory Statement.

 

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  (c) Having considered the advice referred to above (and without any waiver of privilege in respect of that advice), the JPLs and the Directors of the Scheme Companies are of the opinion that in the event the restructuring does not complete, the Scheme Companies (together certain other subsidiaries within the Group) will be insolvent or will be deemed to be insolvent under the laws of the jurisdictions in which they are incorporated.

 

  (d) The Liquidation Analysis illustrates the flow of funds that may arise from the estimated realisations from assets, on an entity by entity basis, and estimated distributions to creditors and shareholders of each entity in a hypothetical liquidation of LDK Solar and its subsidiaries. The Liquidation Analysis reflects the governing insolvency laws and rules applicable to each individual entity based on the jurisdiction in which each subsidiary is domiciled.

 

  (e) The Liquidation Analysis is the result of a significant amount of analysis and diligence completed by Jefferies, the JPLs and management. It was prepared so that the JPLs could assess the possible outcome to creditors of the Scheme Companies and therefore form a view of the estimated net realisations in the event of a hypothetical liquidation. The Liquidation Analysis is based on the financial information and balance sheets on an entity by entity basis provided by management as at 31 May 2014, adjusted to reflect material changes in the balance sheet of each entity since 31 May 2014 where necessary to illustrate estimated liquidation outcomes as at 15 August 2014. The Liquidation Analysis is derived from a number of projections and is based upon estimates and assumptions which may vary materially from any eventual outcome in a liquidation scenario.

 

  (f) The Liquidation Analysis illustrates the potential estimated returns to Scheme Creditors if the restructuring does not proceed as follows:

 

  (i) Senior Note Scheme Creditors in respect of an aggregate claim of US$284.7 million under the Senior Note Indenture, calculated as at 21 February 2014: approximately US$31.5 million or 11.1 % recovery;

 

  (ii) Preferred Obligation Scheme Creditors in respect of an aggregate claim of US$377.50 million under the Preferred Documents, calculated as at 21 February 2014: approximately US$0.9 million or 0.2% recovery; and

 

  (iii) Ordinary Scheme Creditors in respect of aggregated claims of US$47.15 million: approximately US$0.1 million or 0.2% recovery.

 

5  This figure does not reflect the actual claims filed in the provisional liquidation of LDK Solar by Ordinary Scheme Creditors, but is an estimate of claims that will be admitted, based on certain assumptions as set out in the Liquidation Analysis.

 

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  (g) It should be noted that the actual recoveries to Scheme Creditors in a liquidation of LDK Solar and its Subsidiaries will be dependent on a range of factors and issues and may be better or worse than the estimated returns in the Liquidation Analysis. In addition, the timing of asset realisations being achieved and distributions being made on an entity by entity basis in a liquidation scenario is unknown and likely to vary depending on the applicable insolvency procedure. Accordingly the Liquidation Analysis should be considered directional and illustrative in nature and the actual recovery in a liquidation scenario could vary materially from the estimates contained in the Liquidation Analysis (as summarised above).

 

  (h) Scheme Creditors are encouraged to review Appendix (39) (Liquidation Analysis) in order to ensure they have a clear understanding of the methodology and key assumptions which underpin the Liquidation Analysis and the potential recoveries if the restructuring does not proceed.

 

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PART 2

 

7. INTRODUCTION TO THE SCHEMES

This section contains a brief overview of the Schemes. The summary information contained herein does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by references to, the more detailed information presented elsewhere in this Explanatory Statement and to the Schemes.

 

7.1 Introduction

 

  (a) This Explanatory Statement has been prepared by the JPLs and the Directors for the purpose of proposing the Schemes. In doing so, the JPLs have acted as agents of LDK Solar.

 

  (b) The Cayman Scheme and the Hong Kong Scheme are set out in Appendix 7 (Cayman Scheme) and Appendix 8 (Hong Kong Scheme), respectively.

 

  (c) This Explanatory Statement should not be relied upon as a substitute for reading the Schemes themselves. If there is any inconsistency between the terms of the Schemes or any Restructuring Document, and this Explanatory Statement, the terms of the Schemes and/or the Restructuring Document shall prevail. The sections of this Explanatory Statement that describe certain of the Restructuring Documents are included for the convenience of Scheme Creditors. If there is any conflict or inconsistency between the terms of a full form document and the description in this Explanatory Statement, the terms of the full form document shall prevail.

 

7.2 Why have you been sent this document?

A copy of this document has been sent or made available to you because the JPLs and the Directors consider that you are or may be a Scheme Creditor. However, receipt of this document does not confirm or mean that you are a Scheme Creditor or that you will be affected by the Schemes.

 

7.3 What is a Scheme of Arrangement?

 

  (a) A scheme of arrangement enables a company to agree with its creditors, or one or more classes of its creditors, a compromise or arrangement in respect of its debts or obligations owed to those creditors. The court will consider whether it is appropriate to convene meetings of classes of creditors and, if so, the composition of the classes necessary so as to ensure that each meeting consists of creditors whose rights against the Company which are to be released are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.

Cayman Islands

 

  (b) In the Cayman Islands, a scheme of arrangement requires the following to occur in order to become legally binding:

 

  (i) the calling of a meeting of LDK Solar’s creditors or meetings of classes of LDK Solar’s creditors in accordance with directions given by the Grand Court;

 

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  (ii) at each meeting of creditors the approval of a majority in number representing at least 75% in value of the relevant creditors of LDK Solar present in person or by proxy (whether, in this case, by completing the Account Holder Letter and Ballot, the CN Account Holder Letter, the Preferred Proxy Form or the Ordinary Proxy Form) and voting at the meeting;

 

  (iii) the approval of the Grand Court by the making of an order sanctioning the scheme of arrangement; and

 

  (iv) the delivery of a sealed copy of the order sanctioning the scheme of arrangement to the Registrar of Companies.

Hong Kong

 

  (c) In Hong Kong, a scheme of arrangement requires the following to occur in order to become legally binding:

 

  (i) the calling of a meeting of LDK Solar’s creditors or meetings of classes of its creditors in accordance with directions given by the High Court;

 

  (ii) at each meeting of creditors the approval of a majority in number representing at least 75% in value of the relevant creditors of LDK Solar present in person or by proxy (whether, in this case, by completing the Account Holder Letter and Ballot, the CN Account Holder Letter, the Preferred Proxy Form or the Ordinary Proxy Form) and voting at the meeting;

 

  (iii) the approval of the High Court by the making of an order sanctioning the scheme of arrangement; and

 

  (iv) the delivery of an office copy of the order sanctioning the scheme of arrangement to the HK Registrar of Companies.

Cayman Islands and Hong Kong

 

  (d) If the Schemes are approved by the relevant requisite majorities of creditors and sanctioned by the Grand Court and the High Court (as applicable), and the relevant orders sanctioning the schemes of arrangement are delivered as set out above, the schemes of arrangement will bind all the creditors subject to them, including those creditors who voted in favour of the relevant Schemes, those creditors who voted against them, and those creditors who did not vote at all.

 

  (e) A scheme of arrangement will not be sanctioned by the Grand Court and/or the High Court unless the relevant Court is satisfied, among other things, that (i) the scheme of arrangement is in all circumstances fair and reasonable and the classes of creditors voting in respect of the scheme of arrangement have been properly constituted, (ii) the provisions of the applicable statute have been complied with; (iii) each class was fairly represented by those who attended the meeting and the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and (iv) the arrangement is such as an intelligent and honest man, being a member of the class concerned and acting in respect of his interest, might reasonably approve.

 

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7.4 Structure and objectives of the Schemes

 

  (a) The Schemes are proposed in order to effect a restructuring of the Scheme Companies’ indebtedness under the Senior Notes (as constituted by the Senior Note Indenture), the Preferred Documents and, in the case of the Schemes proposed in respect of LDK Solar, the liabilities owing to the Ordinary Scheme Creditors.

 

  (b) The principal compromises and arrangements to be given effect by the Schemes are:

 

  (i) the release in full of Claims of the Senior Note Scheme Creditors against, amongst others, LDK Solar and the Senior Note Guarantors in consideration of the payment of the Senior Note Cash Out Amount (if any) and/or the issue and allotment of the Senior Note Non-Cash Scheme Consideration;

 

  (ii) the release in full of Claims of the Preferred Obligation Scheme Creditors against, amongst others, LDK Silicon and the Preferred Obligors in consideration of the payment of the Preferred Obligation Cash Out Amount (if any) and/or the issue and allotment of the Preferred Obligation Non-Cash Scheme Consideration; and

 

  (iii) the release in full of Claims of the Ordinary Scheme Creditors against LDK Solar in consideration of the payment of the Ordinary Cash Out Amount and/or the issue and allotment of the Ordinary Non-Cash Scheme Consideration.

 

  (c) The Schemes will give effect to the Restructuring Proposal, which has the following objectives:

 

  (i) to avoid placing the Scheme Companies and other members of the Group into bankruptcy or Official Liquidation (or another insolvency process) at some point in the near future, as a result of which the anticipated recoveries for Scheme Creditors could be significantly less than if the Restructuring Proposal were to be completed successfully;

 

  (ii) implement a new, more appropriate capital structure so that the Group will possess a strengthened balance sheet and a level of debt that is more likely to be serviceable in the future;

 

  (iii) effect a cash injection of approximately US$29 million in new money pursuant to the terms of the Exit Funding Arrangements; and

 

  (iv) increase the prospect of generating long-term value for Scheme Creditors and other stakeholders.

 

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  (d) In order to implement the Restructuring Proposal and to effect the release and discharge of the aforesaid liabilities, the JPLs have identified the need to launch the Schemes, which comprise:

 

  (i) The LDK Solar Cayman Scheme, being a Cayman Islands scheme of arrangement between LDK Solar and the Scheme Creditors under section 86 of the Companies Law;

 

  (ii) The LDK Solar HK Scheme, being a Hong Kong scheme of arrangement between LDK Solar and the Scheme Creditors under section 673 and 674 of the Companies Ordinance;

 

  (iii) The LDK Silicon Cayman Scheme, being a Cayman Islands scheme of arrangement between LDK Silicon and the Preferred Obligation Scheme Creditors under section 86 of the Companies Law;

 

  (iv) The LDK Silicon HK Scheme, being a Hong Kong scheme of arrangement between LDK Silicon and the Preferred Obligation Scheme Creditors under section 673 and 674 of the Companies Ordinance; and

 

  (v) The LDK SH HK Scheme, being a Hong Kong scheme of arrangement between LDK Silicon Holding and the Preferred Obligation Scheme Creditors under section 673 and 674 of the Companies Ordinance.

 

  (e) In addition, as set out in paragraph 7.5 below, the Schemes are also part of a larger cross border restructuring. The Restructuring Proposal also involves the implementation of the Chapter 11 Plan and the Recognition Filings, in addition to the launch and implementation of the Schemes.

 

7.5 The Schemes are part of a larger cross border restructuring

 

  (a) In order to ensure that the Restructuring Proposal is effectively implemented, the JPLs have identified a need to protect against hostile creditor actions in the Cayman Islands, Hong Kong and/or the United States. The Schemes are only a part of a broader restructuring and it is therefore contemplated that (as may be appropriate in the judgment of the JPLs):

 

  (i) The US Senior Note Guarantors will file the Chapter 11 Plan in the Bankruptcy Court, being voluntary petitions under Chapter 11 of Title 11 of the Bankruptcy Code. Information on the Chapter 11 Plan is set out in Part 3 (Overview of the Chapter 11 Plan) of this Explanatory Statement; and

 

  (ii) LDK Solar, acting by the JPLs will make the Recognition Filing in the Bankruptcy Court for a Chapter 15 Scheme Order in respect of the LDK Solar Cayman Scheme. The Recognition Filing is a petition made under Chapter 15 of the Bankruptcy Code seeking recognition of certain provisions of the LDK Solar Cayman Scheme by the Bankruptcy Court.

 

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  (b) It is a condition to the Schemes that the Chapter 15 Order be granted, which condition may be waived by LDK Solar (acting by the JPLs), with the prior written consent of the Senior Note Trustee (not to be unreasonably withheld) and the Majority Preferred Holders (not to be unreasonably withheld), such waiver being without prejudice to LDK Solar. An example of circumstances in which the JPLs might consider exercising such rights is if the Chapter 15 Order is not granted by the Bankruptcy Court but there is a significantly high proportion of support by the Scheme Creditors for the Schemes and the Chapter 11 Plan.

 

  (c) If the Chapter 15 Scheme Order is not granted by the Bankruptcy Court, and the Schemes and the Chapter 11 Plan are approved but with a significant number of Scheme Creditors having voted against the Schemes, the JPLs may determine that it is not appropriate in the circumstances to seek to exercise their right to waive the condition that the Chapter 15 Scheme Order be granted. In this scenario, the Restructuring Proposal may not be implemented and the Schemes would lapse on the Scheme Longstop Date.

 

  (d) If LDK Solar seeks to exercise its right to waive the condition that the Chapter 15 Scheme Order be granted, but the Senior Note Trustee or the Majority Preferred Holders do not give their prior written consent thereto such that the waiver can take effect before the Scheme Long Stop Date, the Scheme will lapse and have no effect.

 

7.6 Are you a “Scheme Creditor” for the purposes of the Scheme Class Meetings?

The following persons are Scheme Creditors for the purposes of the Schemes:

 

  (a) Senior Note Scheme Creditors: information on which persons constitute Senior Note Scheme Creditors and on the actions that Senior Note Scheme Creditors are required to take under the LDK Solar Cayman Scheme, the LDK Solar HK Scheme and the Chapter 11 Plan are set out in the following sections:

 

  (i) Part 4 (Senior Note Scheme Creditors) of this Explanatory Statement; and

 

  (ii) Appendix 12 (Senior Solicitation Packet) to this Explanatory Statement.

 

  (b) Preferred Obligation Scheme Creditors: information on which persons constitute Preferred Obligation Scheme Creditors and on the actions that Preferred Obligation Scheme Creditors are required to take under the LDK Solar Cayman Scheme, the LDK Solar HK Scheme, the LDK Silicon Cayman Scheme, the LDK Silicon HK Scheme and the LDK SH HK Scheme are set out in the following sections:

 

  (i) Part 5 (Preferred Obligation Scheme Creditors); and

 

  (ii) Appendix 13 (Preferred Solicitation Packet) of this Explanatory Statement.

 

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  (c) Ordinary Scheme Creditors: information on which persons constitute Ordinary Scheme Creditors and on the actions that Ordinary Scheme Creditors are required to take under the LDK Solar Cayman Scheme and the LDK Solar HK Scheme are set out in the following sections:

 

  (i) Part 6 (Ordinary Scheme Creditors); and

 

  (ii) Appendix 14 (Ordinary Solicitation Packet) of this Explanatory Statement.

 

7.7 Third parties

The Senior Note Guarantors and the Preferred Obligors shall execute a Deed of Undertaking, pursuant to which they will agree to appear by Counsel at the petition to sanction the Schemes and to undertake to the Grand Court and the High Court to be bound by the terms of the Schemes. Pursuant to the Deed of Undertaking, the Senior Note Guarantors and the Preferred Obligors agree to execute and do or procure to be executed and done all such documents, acts or things as may be necessary or desirable to be executed or done by it for the purposes of giving effect to the Schemes.

 

7.8 Scheme Supervisors

 

  (a) The Scheme Supervisors must be Qualified Insolvency Practitioners and be suitably experienced in the reasonable opinion of the remaining Scheme Supervisor (provided there is one and, if not, in the reasonable opinion of LDK Solar) to discharge the functions of a Scheme Supervisor under the Schemes. A Scheme Supervisor shall not take office until he or his firm has entered into the Scheme Supervisors Agreement, which shall include provisions as to his remuneration and expenses, and has contracted to be bound by the terms of the Schemes to the extent that they apply to him as Scheme Supervisor. The Scheme Supervisors shall initially be Eleanor Fisher and Tammy Fu, both partners of Zolfo Cooper (Cayman) Ltd. The Scheme Supervisors shall act as agents of LDK Solar.

 

  (b) The Scheme Supervisors shall discharge the duties and responsibilities imposed upon them by the Schemes.

 

  (c) To exercise their functions the Scheme Supervisors shall have all of the powers necessary or desirable to enable them to discharge their duties and responsibilities under the Schemes including, but not limited to, engaging Lucid to act as information agent for the Holding Period on such terms as the Scheme Supervisors may in their discretion consider appropriate. The Schemes acknowledge that the Scheme Supervisors cannot and shall not exercise any power that would result in their assuming control of the Scheme Companies’ affairs so as to supplant such Scheme Companies’ directors.

 

  (d) The Scheme Supervisors shall be remunerated by LDK Solar in respect of their role in the Schemes and all acts reasonably incidental thereto and in accordance with the Scheme Supervisors Agreement. Such remuneration and expenses are to be approved by LDK Solar and such approval shall not be unreasonably withheld.

 

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  (e) If there are no Scheme Supervisors in office or only one Scheme Supervisor in office, LDK Solar shall forthwith fill the vacancy, provided that LDK Solar shall not be required to fill such vacancy if the Scheme Supervisors have resigned on the grounds that there is no further work to be done by the Scheme Supervisors.

 

  (f) Except to the extent required by law, no Scheme Creditor shall be entitled to challenge the validity of any act done or omitted to be done in good faith by the Scheme Supervisors in accordance with and to implement the provisions of the Schemes or the exercise by the Scheme Supervisors in good faith of any power conferred upon them for the purposes of the Schemes if exercised in accordance with and to implement the provisions of the Schemes.

 

  (g) A Scheme Supervisor shall not be liable for any loss resulting from any act he does or omits to do, unless any such loss is attributable to his own wilful default, breach of trust, fraud or dishonesty.

 

  (h) The Scheme Supervisors shall be entitled to an indemnity out of the property of the Scheme Companies against:

 

  (i) all Claims, Liabilities and Proceedings (including all legal and other costs and expenses which they incur in relation thereto) brought or made against them by LDK Solar or by any other person in respect of any act done or omitted to be done in relation to LDK Solar by them, save to the extent that they are found by a court of competent jurisdiction to have acted or omitted to act in a manner which was in wilful default, in breach of trust, fraudulent or dishonest in the course of performing their duties and functions under the Schemes; and

 

  (ii) all costs, charges, expenses and liabilities properly incurred by each of them in the course of performing their duties and functions under the Schemes.

 

  (i) A Scheme Supervisor shall vacate office if they:

 

  (i) become bankrupt;

 

  (ii) cease to be a Qualified Insolvency Practitioner;

 

  (iii) are admitted to hospital because of mental disorder or are the subject of an order concerning their mental disorder made by a Court having jurisdiction in the Cayman Islands or Hong Kong or elsewhere in such matters, such that they are, in the reasonable opinion of the remaining Scheme Supervisor (provided there is one and, if not, in the reasonable opinion of LDK Solar), unable to carry out their duties as Scheme Supervisor;

 

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  (iv) are convicted of an indictable offence or is convicted of any offence by a court having jurisdiction in any other country where that offence, if committed in the Cayman Islands or Hong Kong, would have been an indictable offence under Cayman Islands or Hong Kong law; or

 

  (v) resigns their office by giving 60 days’ notice in writing to LDK Solar or such shorter period of notice as may be agreed by LDK Solar or resign their office with immediate effect by giving notice in writing to LDK Solar if they consider that they should for professional regulatory reasons or in the event of non-payment of their fees when due and such fees have been approved by LDK Solar, a meeting of the Scheme Creditors or pursuant to a final order of the Grand Court or High Court, as applicable.

 

7.9 The Scheme Class Meetings

 

  (a) LDK Solar has obtained orders from the Grand Court and the High Court granting permission to convene separate meetings of:

 

  (i) the Senior Note Scheme Creditors, who are entitled and encouraged to attend both the CI Senior Note Meeting and the HK Senior Note Meeting;

 

  (ii) the Preferred Obligation Scheme Creditors, who are entitled and encouraged to attend the LDK Solar CI Preferred Meeting and the LDK Solar HK Preferred Meeting; and

 

  (iii) the Ordinary Scheme Creditors, who are entitled and encouraged to attend both the LDK Solar CI Ordinary Meeting and the LDK Solar HK Meeting.

 

  (b) LDK Silicon has also obtained orders from the Grand Court and the High Court granting permission to convene meetings of the Preferred Obligation Scheme Creditors, who are entitled and encouraged to attend both the LDK Silicon CI Preferred Meeting and the LDK Silicon HK Preferred Meeting.

 

  (c) LDK Silicon Holding has also obtained an order of the High Court to convene the LDK SH Preferred Meeting, which the Preferred Obligation Scheme Creditors are entitled and encouraged to attend.

 

  (d) The Cayman Scheme Meetings will be held at the offices of Campbells at Floor 4, Willow House, Cricket Square, George Town, Grand Cayman KY1-1103. The Hong Kong Scheme Meetings will be held at Sidley’s Hong Kong offices at 39/F, Two International Finance Centre Central, Hong Kong. Scheme Creditors who attend the Cayman Scheme Meetings will also be able to attend the Hong Kong Scheme Meetings, via video conference from Campbells’ offices. Similarly, Scheme Creditors who attend the Hong Kong Scheme Meetings will also be able to attend the Cayman Scheme Meetings, via video conference from Sidley’s Hong Kong offices. Scheme Creditors will also be able to dial into each of the Cayman Scheme Meetings and the Hong Kong Scheme Meetings using the LDK Dial-In Details.

 

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  (e) The Scheme Class Meetings, with any adjournment as may be appropriate, will be held as follows:

 

  (i) In respect of the Preferred Obligation Scheme Creditors:

 

  (A) the LDK Silicon CI Preferred Meeting to be held on 16 October 2014 at 8:00pm (Cayman Islands time)/ 17 October 2014 at 9:00am (Hong Kong time);

 

  (B) the LDK Solar CI Preferred Meeting to be held on 16 October 2014 at 8:10pm (Cayman Islands time)/ 17 October 2014 at 9:10am (Hong Kong time);

 

  (C) the LDK Silicon HK Preferred Meeting to be held on 16 October 2014 at 8:50pm (Cayman Islands time)/ 17 October 2014 at 9:50am (Hong Kong time);

 

  (D) the LDK SH Preferred Meeting to be held on 16 October 2014 at 9:00pm (Cayman Islands time)/ 17 October 2014 at 10:00am (Hong Kong time); and

 

  (E) the LDK Solar HK Preferred Meeting to be held on 16 October 2014 at 9:20pm (Cayman Islands time)/ 17 October 2014 at 10:20am (Hong Kong time);

 

  (ii) In respect of the Senior Note Scheme Creditors:

 

  (A) the CI Senior Note Meeting to be held on 16 October 2014 at 8:20pm (Cayman Islands time) / 17 October 2014 at 9.20am (Hong Kong time); and

 

  (B) the HK Senior Note Meeting to be held on 16 October 2014 at 9:10pm (Cayman Islands time) / 17 October 2014 at 10:10am;

 

  (iii) In respect of the Ordinary Scheme Creditors:

 

  (A) the LDK Solar CI Ordinary Meeting to be held on 16 October 2014 at 8:30pm (Cayman Islands time) / 17 October 2014 at 9.30am (Hong Kong time); and

 

  (B) the LDK Solar HK Ordinary Meeting to be held on 16 October 2014 at 8:40pm (Cayman Islands time) / 17 October 2014 at 9:40am.

 

  (f) Notice of the Senior Note Meetings, the Preferred Obligation Meetings and the Ordinary Meetings are included at Appendix 9 (Notice of Senior Note Meetings), Appendix 10 (Notice of Preferred Meetings) and Appendix 11 (Notice of Ordinary Meetings) of this Explanatory Statement.

 

  (g) Senior Note Scheme Creditors will be required to submit an Account Holder Letter and Ballot to be used for voting at the Senior Note Meetings, which is included at Schedule 1 to Appendix 12 (Senior Note Solicitation Packet) to this Explanatory Statement.

 

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  (h) Similarly, Preferred Obligation Scheme Creditors and Ordinary Scheme Creditors (who are not CN Holders) will be required to submit the Preferred Proxy Form and the Ordinary Proxy Form, respectively, in each case to be used for voting at the Preferred Obligation Meetings and the Ordinary Meetings (as applicable), as set out at Appendix 13 (Preferred Solicitation Packet) and Appendix 14 (Ordinary Solicitation Packet) to this Explanatory Statement.

 

  (i) Ordinary Scheme Creditors who are CN Holders will be required to submit a CN Account Holder Letter to be used for voting at the Ordinary Meetings.

 

  (j) Each Scheme Creditor or its proxy will be required to register its attendance at the relevant Scheme Class Meeting at least one hour prior to its commencement. Registration at the Cayman Scheme Meetings will commence at 7:00pm (Cayman Islands time) on 16 October 2014 and registration at the Hong Kong Scheme Meetings will commence at 8:00am (Hong Kong time) on 17 October 2014.

 

  (k) In determining the amount of a Scheme Creditor’s Scheme Claims for the purpose of voting at the applicable Scheme Class Meeting, the Chairperson of the meeting shall be entitled to rely on information provided by the Information Agent (in the case of the Senior Note Scheme Creditors and the CN Holders) and in the case of the Preferred Obligation Scheme Creditors and the Ordinary Scheme Creditors (other than the CN Holders), the books and records of the Scheme Companies. Ordinary Scheme Creditors who are not CN Holders shall be required to submit supporting evidence of their Scheme Claim in the Claim Form, along with their completed Ordinary Proxy Form.

 

  (l) Any person attending the Scheme Class Meetings will need to produce evidence of personal identity (for example, two forms of identification evidence including a passport or other government issued picture identification, along with a recent utility bill or other document confirming the attendees’ address). If appropriate personal identification and authorisation evidence is not produced, that person may not be permitted to attend or vote.

 

  (m) A Scheme Creditor’s professional advisers will be allowed to attend the Scheme Class Meetings if that Scheme Creditor notifies the JPLs of the name of the person(s) they wish to attend (using the contact details set out in the Communication Policy) prior to the Scheme Class Meetings. The Chairperson of the Scheme Class Meetings will have the discretion to require professional advisers to leave the applicable Scheme Class Meeting if he or she considers this to be necessary.

 

7.10 Approving each of the Cayman Scheme and the Hong Kong Scheme

 

  (a) The majority required to approve the Schemes is a majority in number representing at least 75 per cent (by value) of the Scheme Claims of each of the Scheme Creditors present and voting (whether in person or by proxy) at each of the following Scheme Class Meetings:

 

  (i) the Senior Note Scheme Creditors who vote at the CI Senior Note Meeting;

 

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  (ii) the Senior Note Scheme Creditors who vote at the HK Senior Note Meeting;

 

  (iii) the Preferred Obligation Scheme Creditors who vote at the LDK Solar CI Preferred Meeting;

 

  (iv) the Preferred Obligation Scheme Creditors who vote at the LDK Solar HK Preferred Meeting;

 

  (v) the Preferred Obligation Scheme Creditors who vote at the LDK Silicon CI Preferred Meeting;

 

  (vi) the Preferred Obligation Scheme Creditors who vote at the LDK Silicon HK Preferred Meeting;

 

  (vii) the Preferred Obligation Scheme Creditors who vote at the LDK SH Preferred Meeting

 

  (viii) the Ordinary Scheme Creditors who vote at the LDK Solar CI Ordinary Meeting; and

 

  (ix) the Ordinary Scheme Creditors who vote at the LDK Solar HK Ordinary Meeting.

 

  (b) The Scheme Claims admitted for voting purposes by the JPLs will be notified to the Scheme Creditors at the applicable Scheme Class Meeting, but such notification does not (of itself) constitute an admission of the existence or amount of any liability of any of the Scheme Companies. If a Scheme Creditor disagrees with the value of the Scheme Claim attributed to it, it must notify the JPLs.

 

  (c) The JPLs will be entitled to defer the announcement of the result of the vote.

 

7.11 Sanction Hearing for each of the Cayman Scheme and the Hong Kong Scheme

 

  (a) The hearings before the Grand Court in respect of the Cayman Scheme, and the High Court in respect of the Hong Kong Scheme, will be necessary in order to sanction the Schemes, provided that:

 

  (i) the Senior Note Scheme Creditors vote to support:

 

  (A) the Cayman Scheme at the CI Senior Note Meeting; and

 

  (B) the Hong Kong Scheme at the HK Senior Note Meeting;

 

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  (ii) the Preferred Obligation Scheme Creditors vote to support:

 

  (A) the Cayman Scheme at the LDK Solar CI Preferred Meeting and the LDK Silicon CI Preferred Meeting; and

 

  (B) the Hong Kong Scheme at the LDK Solar HK Preferred Meeting, the LDK Silicon HK Preferred Meeting and the LDK SH Preferred Meeting; and

 

  (iii) the Ordinary Creditors vote to support:

 

  (A) the Cayman Scheme at the LDK Solar CI Ordinary Meeting; and

 

  (B) the Hong Kong Scheme at the LDK Solar HK Ordinary Meeting.

 

  (b) Any Scheme Creditor entitled (but not obliged) to attend these hearings, through Counsel, to support or oppose the sanction of the Cayman Scheme and/or the Hong Kong Scheme.

 

  (c) The hearing to consider whether to sanction the Cayman Scheme will take place at 9.30am (Cayman Islands time) on 6 November 2014 at the Grand Court. The hearing to consider whether to sanction the Hong Kong Scheme will take place at [] on [] 2014 at the High Court.

 

  (d) Upon the occurrence of the following events, and subject to the Conditions set out in the Schemes:

 

  (i) the Grand Court sanctioning the Cayman Scheme; and

 

  (ii) the High Court sanctioning the Hong Kong Scheme,

the Cayman Scheme and the Hong Kong Scheme will become binding on all Scheme Creditors, wherever they are and regardless of whether they have voted for or against the Cayman Scheme and/or the Hong Kong Scheme and whether they have voted at all.

 

7.12 Conditions to the Schemes

 

  (a) Save for certain provisions of the Schemes, which shall become immediately effective, the Schemes will be effective on the date on which the following conditions are satisfied or (in the case of paragraph 7.12(iv) below) waived:

 

  (i) in respect of the Cayman Scheme, the sanction with or without modification (but subject to such modification not being inconsistent with the terms of the RSAs and being acceptable to LDK Solar) of the Hong Kong Scheme by the High Court;

 

  (ii) in respect of the Hong Kong Scheme, the sanction with or without modification (but subject to such modification not being inconsistent with the terms of the RSAs and being acceptable to LDK Solar) of the Cayman Schemes by the Grand Court;

 

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  (iii) LDK Solar having paid all duly invoiced fees of the Advisers;

 

  (iv) the Chapter 15 Scheme Order being granted, which condition may be waived by LDK Solar (acting by the JPLs) with the prior written consent of the Senior Note Trustee (not to be unreasonably withheld) and the Majority Preferred Holders (not to be unreasonably withheld);

 

  (v) the execution and delivery, by the claimants and plaintiffs of the Munich Re Claim, of an agreement containing ordinary and customary compromise and settlement provisions in respect of the Munich Re Claim, such agreement to be effective upon execution (subject to court sanction) and conditional only upon the occurrence of the Effective Date;

 

  (vi) each of LDK Solar, LDK Silicon, LDK Silicon Holding and each Senior Note Guarantor, Preferred Obligor and Mr Peng having executed the Restructuring Documents to which they are expressed to be a party, save that the execution of the Apollo Guarantee shall not be a condition to the Effective Date if it is waived by the Majority Preferred Holders;

 

  (vii) each condition precedent in the Restructuring Documents having been satisfied or waived, other than the occurrence of the Effective Date of the Hong Kong Scheme or the Cayman Scheme (as the case may be);

 

  (viii) in respect of the Hong Kong Scheme, sealed copies of the High Court Orders being delivered to the HK Registrar of Companies for registration; and

 

  (ix) in respect of the Cayman Scheme, sealed copies of the Grand Court Order being delivered to the Registrar of Companies for registration.

 

  (b) If the Schemes have not become effective by the Scheme Longstop Date, the Schemes shall lapse and no provision of the Schemes shall have any force or effect.

 

7.13 Instructions to the Common Depository in relation to the Senior Notes

 

  (a) In order to implement the Restructuring Proposal and give effect to the terms of the Schemes, LDK Solar shall:

 

  (i) instruct the Common Depositary to, on the Effective Date, to mark down the Senior Global Note representing the Senior Notes for cancellation; and

 

  (ii) take such other action as may be required to effect the cancellation, mark down and discharge of the Senior Notes under the Senior Note Indenture.

 

  (b) Each of the Senior Note Scheme Creditors also authorises LDK Solar on and from the Effective Date to take or to instruct the Senior Note Trustee, the Common Depositary, each Intermediary and/or each Account Holder to take whatever action is necessary or appropriate to give effect to the terms of the Schemes, including the taking of such actions as may be necessary to implement the Scheme Steps.

 

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7.14 Authority to execute documents on behalf of Scheme Creditors

 

  (a) Each of the Scheme Creditors irrevocably authorises LDK Solar (in respect of the LDK Solar Cayman Scheme and the LDK Solar HK Scheme) to enter into, execute and deliver as a deed (or otherwise) on behalf of that Scheme Creditor in its capacity as a Scheme Creditor (including any person to whom a Scheme Creditor has transferred its rights in respect of its Scheme Claim after the Record Time) (to the extent applicable):

 

  (i) the Deeds of Release;

 

  (ii) the Restructuring Documents; and

 

  (iii) any and all such other documents that LDK Solar reasonably considers necessary to give effect to the terms of the Schemes,

in each case to be held in escrow until or otherwise to become effective no earlier than the Effective Date in accordance with the Scheme Steps for the purposes of giving effect to the terms of the Schemes.

 

  (b) Each of the Preferred Obligation Scheme Creditors also irrevocably authorises LDK Silicon (in respect of the LDK Silicon Cayman Scheme and the LDK Silicon HK Scheme) to enter into, execute and deliver as a deed (or otherwise) on behalf of that Preferred Obligation Scheme Creditor in its capacity as a Scheme Creditor (including any person to whom a Preferred Obligation Scheme Creditor has transferred its rights in respect of its Scheme Claim after the Record Time) (to the extent applicable):

 

  (i) the Deeds of Release;

 

  (ii) the Restructuring Documents; and

 

  (iii) any and all such other documents that LDK Silicon reasonably considers necessary to give effect to the terms of the Schemes,

in each case to be held in escrow until or otherwise to become effective no earlier than the Effective Date in accordance with the Scheme Steps for the purposes of giving effect to the terms of the Schemes.

 

  (c) In addition, and without prejudice to the authority granted in respect of LDK Solar and LDK Silicon above, each of the Preferred Obligation Scheme Creditors irrevocably authorises LDK Silicon Holding (in respect of the LDK SH HK Scheme) to enter into, execute and deliver as a deed (or otherwise) on behalf of that Preferred Obligation Scheme Creditor in its capacity as a Scheme Creditor (including any person to whom a Preferred Obligation Scheme Creditor has transferred its rights in respect of its Scheme Claim after the Record Time) (to the extent applicable):

 

  (i) the Deeds of Release;

 

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  (ii) the Restructuring Documents; and

 

  (iii) any and all such other documents that LDK Silicon Holding reasonably considers necessary to give effect to the terms of the Schemes,

in each case to be held in escrow until or otherwise to become effective no earlier than the Effective Date and in accordance with the Scheme Steps for the purposes of giving effect to the terms of the Schemes.

 

  (d) Each of the Senior Note Scheme Creditors irrevocably authorises LDK Solar and/or the Senior Note Trustee on and from the Effective Date to take all steps to cancel, mark down and discharge the Senior Global Note as may be necessary and for the Senior Note Trustee to rely on the Senior Note Trustee Instruction provided by LDK Solar without any duty to investigate further and without incurring any liability for doing so.

 

  (e) Each of the CN Holders and Restructured CN Holders hereby irrevocably authorises LDK Solar and/or the CN Trustee on and from the Effective Date to take all steps to cancel, mark down and discharge the CN Global Notes as may be necessary and for the CN Trustee to rely on the CN Trustee Instruction provided by LDK Solar without any duty to investigate further and without incurring any liability for doing so.

 

  (f) Each authority granted above shall be treated, for all purposes whatsoever and without limitation, as having been granted by deed.

 

  (g) The Deeds of Release and the Restructuring Documents shall be substantially in the form attached to the Schemes, subject to any non-material modification approved or imposed by the Grand Court or the High Court.

 

  (h) Each Scheme Creditor (for itself and its Designated Recipient) on and from the Effective Date irrevocably ratifies and confirms any act or omission done, caused or purported to be done by the Scheme Companies, the Subsidiaries, the JPLs, any director, or any of their respective directors, managers, officers, partners or affiliates pursuant to or in connection with the Schemes.

 

7.15 Scheme Steps

 

  (a) Provided that the statutory majorities of Scheme Creditors referred to in paragraph 7.10(a) of this Explanatory Statement vote to support the Cayman Scheme and the Hong Kong Scheme, the following steps set out below will occur and shall to the extent possible take effect in the order set out below:

 

  (i) As soon as reasonably practicable following the Scheme Class Meetings, LDK Solar, or if applicable the JPLs, shall make the Recognition Filings in respect of the LDK Solar Cayman Scheme (if not already made by such time) and use reasonable endeavours to procure a Recognition Hearing within a reasonable time following the date of the LDK Solar Court Order, unless such condition is waived.

 

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  (ii) As soon as reasonably following the date of the Court Orders, LDK Solar (acting by one of the JPLs), LDK Silicon and LDK Silicon Holding (as applicable) will procure that stamped copies of the Court Orders are delivered to the Registrar of Companies and the HK Registrar of Companies for registration.

 

  (iii) As soon as reasonably practicable following the date of the Court Orders, LDK Solar (acting by one of the JPLs), LDK Silicon, and LDK Silicon Holding (as applicable) will execute the Restructuring Documents (to be held in escrow until or otherwise to become effective no earlier than the Effective Date and only capable of coming into effect on or after the Effective Date), for themselves and on behalf of each Senior Note Guarantor, each Preferred Obligor and each Scheme Creditor as applicable, and will procure that the 2018 Convertible Bond Trustee and the Preferred Convertible Bond Trustee execute the Restructuring Documents to which they are respectively party (to be held in escrow until or otherwise to become effective no earlier than the Effective Date and only capable of coming into effect on or after the Effective Date).

 

  (iv) With effect from the Effective Date, each Qualifying Scheme Creditor who has elected or is deemed to have elected to receive the Cash Out Amount shall become entitled to receive the Cash Out Amount on the Payment Date in accordance with the Schemes.

 

  (v) With effect from the Effective Date, each Qualifying Scheme Creditor who has elected or is deemed to have elected to receive the Non-Cash Scheme Consideration shall become entitled to receive the relevant Non-Cash Scheme Consideration on the Issue Date in accordance with the Schemes.

 

  (vi) On the Effective Date, LDK Solar acting as agent and attorney for the Senior Note Scheme Creditors shall deliver the Senior Note Trustee Instruction to the Senior Note Trustee.

 

  (vii) On the Effective Date, LDK Solar as agent and attorney for the Senior Note Scheme Creditors shall deliver the Common Depositary Instruction to the Common Depositary.

 

  (viii) On the Effective Date, LDK Solar as agent and attorney for the Ordinary Scheme Creditors, acting as a class in respect of the Ordinary Scheme Creditors including the CN Holder and Restructured CN Holders, shall deliver the Clearing System Instruction to the Clearing Systems.

 

  (ix) On the Effective Date, LDK Silicon and LDK Silicon Holding shall take such action as may be required to effect the cancellation and discharge of the Preferred Obligations which, for the avoidance of doubt, shall not affect any Reserved Claim.

 

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  (x) On the Effective Date, Lucid shall deliver the Senior Note Clearing Instruction to the Senior Clearing Systems and the CN Clearing Instruction to the Clearing Systems.

 

  (xi) The Common Depositary shall upon receipt of the Common Depositary Instruction be irrevocably authorised and instructed to, upon receipt of corresponding instructions to that effect from the Senior Clearing Systems deliver the Senior Global Note to the Registrar, for cancellation and take such other action as may be necessary to effect the cancellation, mark down and discharge of the Senior Notes under the Senior Note Indenture.

 

  (xii) Upon receipt by the Common Depositary of instructions to that effect from the Senior Clearing Systems, the Common Depositary will deliver the Senior Global Note to the Registrar for cancellation, and take such other action as may be required to effect the cancellation, mark down and discharge of the Senior Notes in accordance with or under the Senior Note Indenture.

 

  (xiii) The Clearing Systems shall upon receipt of the Clearing System Instruction be irrevocably authorised and instructed to take such action as may be necessary to effect the cancellation, mark down and discharge of the CNs.

 

  (xiv) On or after the Effective Date, the Restructuring Documents shall take effect in accordance with their terms.

 

  (xv) As soon as reasonably practicable following the Effective Date, the Preferred Obligations shall be cancelled and any certificates relating thereto shall be returned to LDK Silicon for cancellation (and any certificates which are not returned by Preferred Obligation Scheme Creditors before the Issue Date or Payment Date shall be deemed to be cancelled).

 

  (xvi) On the Payment Date, LDK Solar will pay the Cash Out Amount to those Qualifying Scheme Creditors who have become entitled to receive the Cash Out Amount (subject to and in accordance with the terms of the Schemes.

 

  (xvii) On the Issue Date, LDK Solar will:

 

  (A) issue and allot the Shares to the Qualifying Scheme Creditors who have become entitled to receive them in accordance with their respective entitlements under the Schemes;

 

  (B) issue the 2018 Convertible Bonds to the Senior Note Scheme Creditors who have become entitled to receive them in accordance with their respective entitlements under the Schemes;

 

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  (C) issue the Preferred Convertible Bonds to the Preferred Obligation Scheme Creditors who have become entitled to receive them in accordance with their respective entitlements under the Schemes; and

 

  (D) issue the 2018 Convertible Bonds to the Admitted Ordinary Scheme Creditors who have become entitled to receive them in accordance with their respective entitlements under the Schemes,

in each case, subject to and in accordance with the terms of the Schemes.

 

  (xviii) The Restructuring Documents shall be executed after the latter of (i) the date of the Grand Court Order; or (ii) the High Court Order, but shall only take effect in accordance with their terms and the terms of the Schemes.

 

7.16 What happens when the Schemes become effective?

Notice of the Effective Date and distribution of Claim Forms to the Ordinary Scheme Creditors

 

  (a) Not more than five Business Days after the Effective Date, the Scheme Companies shall give notice that the Schemes have become effective, and of the Bar Date in the following ways:

 

  (i) by notice on the Scheme Website;

 

  (ii) by notice through the Clearing Systems;

 

  (iii) by notice via electronic mail to each person who either of the Scheme Companies believes may be a Scheme Creditor, and which has registered as a Scheme Creditor with any of the Scheme Companies, or otherwise notified the JPLs of its valid email address; and

 

  (iv) by notice in the Cayman Compass, South China Morning Post, Hong Kong Economic Times and the international editions of the Wall Street Journal.

 

  (b) The notice of the occurrence of the Effective Date shall request Ordinary Scheme Creditors to enter the details of their Ordinary Claims on an electronic Claim Form to be found on the Scheme Website. An Ordinary Scheme Creditor may also request a paper Claim Form from the Scheme Supervisors who will send a copy of the paper Claim Form to the Scheme Creditor as soon as is reasonably practicable after receipt of the request.

 

  (c) All Claim Forms must be finalised and submitted by email prior to the Bar Date, or in the case of paper Claim Forms, sent to the Scheme Supervisors to arrive on or before the Bar Date.

 

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  (d) Each Claim Form should be completed in accordance with its instructions and should include:

 

  (i) the Ordinary Claimant’s name, address, relevant email address(es) and telephone number(s);

 

  (ii) the total amount of the Ordinary Claim as at the Record Time;

 

  (iii) confirmation of whether or not the Ordinary Claim includes interest and, if so, the basis upon which the Ordinary Claimant claims to be entitled to interest;

 

  (iv) particulars of how and when the debt was incurred by LDK Solar;

 

  (v) the legal basis of the liability of LDK Solar for the Ordinary Claim;

 

  (vi) any other facts which would assist the Scheme Supervisors in considering the Ordinary Claim; and

 

  (vii) the actual or electronic signature of the person signing the Claim Form, his name and contact details, and a statement of the basis upon which he is authorised to act on behalf of the Ordinary Claimant.

 

  (e) Subject to para 7.16(f) an Ordinary Scheme Creditor shall not have any entitlement to any Ordinary Cash Out Amount or Ordinary Non-Cash Scheme Consideration, unless it has submitted a Claim Form on or before the Bar Date. Subject to Clause 7.16(f), no Ordinary Claim will be Accepted as an Admitted Ordinary Claim if a valid Claim Form has not been submitted on or before the Bar Date.

 

  (f) A Claim Form shall be deemed to have been submitted for an aggregate amount not exceeding US$1,648,320, plus interest at 5 per cent. per annum from 21 February 2014 to the Effective Date by or on behalf of all CN Holders. The amount for which such Ordinary Scheme Claim is Accepted shall be adjusted by the Scheme Supervisors so as not to double count Ordinary Scheme Claims set out in any Claim Forms and/or CN Account Holder Letters actually submitted by or on behalf of such CN Holders.

 

  (g) Copies of all the documents evidencing the existence and amount of the Ordinary Claim must be submitted with the Claim Form. The Scheme Supervisors may require the Ordinary Claimant to submit further and better particulars of the Ordinary Claim, including additional supporting documentation, and/or may require that the Claim Form be verified by affidavit.

 

  (h) Ordinary Claimants shall also submit to the Scheme Supervisors on request such additional information as is reasonably required for LDK Solar to make claims against third parties arising in connection with their Ordinary Claims.

 

  (i) Ordinary Claimants may submit to the Scheme Supervisors a revised Claim Form together with any relevant supporting documentation, at any time up to and including the Bar Date.

 

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  (j) After the Bar Date, Ordinary Scheme Creditors are not entitled to make or revise an Ordinary Claim or provide further information (unless required to do so in accordance with the Schemes).

Record Time and Scheme Claims

 

  (k) All Scheme Claims, including contingent and prospective Claims, shall be determined as at the Record Time.

Valuation and Set Off of Scheme Claims

 

  (l) If the Ordinary Cash Out Amount and/or Ordinary Non-Cash Scheme Consideration is to be paid or issued/allotted to an Ordinary Claimant before the date on which that Ordinary Claimant’s Admitted Ordinary Claim would have fallen due for payment, the amount of the Ordinary Cash Out Amount and/or Ordinary Non-Cash Scheme Consideration shall be discounted for accelerated payment using the rate of interest prescribed by the Judgment Debts Rules.

 

  (m) The Scheme Supervisors shall make a just estimate so far as is possible of the value of any Ordinary Claim which, by reason of it being subject to any contingency, sounding only in damages or for any other reason including a Claim that is in its nature unliquidated or unascertained, does not bear a certain value. The Scheme Supervisors shall give notice of the amount of their estimate to the Ordinary Claimant and shall state in such notice the basis upon which the estimate has been made. In estimating any unliquidated claim for damages for breach of contract, the Scheme Supervisors shall assume that the Ordinary Claimant has taken all such steps as may be reasonable to mitigate his loss.

 

  (n) If the Ordinary Claim is for payments of a periodic nature, the Ordinary Claimant may claim for any unpaid amount accrued up to the Record Time. In respect of LDK Solar, unless the JPLs continue to make payments which accrue after the Record Time as an expense of the provisional liquidation, the Ordinary Claimant’s claim in respect of such amounts shall be limited to a claim for damages for breach of contract. In calculating the amount of damages, the Scheme Supervisors shall assume that the Ordinary Claimant has taken all such steps as may be reasonable to mitigate his loss and shall apply a discount for accelerated payment using the rate of interest prescribed by the Judgment Debts Rules.

 

  (o) Any contractual right of set-off, non set-off or netting arrangement agreed prior to the Effective Date (including both bilateral and multi-lateral set-off or netting arrangements) (referred to as a “set-off agreement”, “non set-off agreement” and “netting agreement”) between LDK Solar and any Ordinary Claimant is binding upon LDK Solar and shall be enforced by the Scheme Supervisors in determining the Ordinary Claim.

 

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  (p) If LDK Solar has not concluded any set-off, non set-off or netting agreement with the Ordinary Claimant but there have been mutual credits, mutual debts or other mutual dealings between such parties:

 

  (i) an account shall be taken as at the Record Time of what is due from each party to the other in respect of the mutual dealings, and the sums due from one party shall be set off against the sums due from the other by the Scheme Supervisors in determining the Ordinary Claim;

 

  (ii) for the purpose of that account, sums due from LDK Solar to the Ordinary Claimant shall not be included in the account taken if the Ordinary Claimant had actual notice at the time they became due that the winding up petition (FSD No. 14 of 2014 – AJJ) had been presented by LDK Solar on 21 February 2014; and

 

  (iii) any transfer or assignment of claims after 21 February 2014 shall be disregarded; and

 

  (iv) only the balance (if any) of the account shall be Accepted as an Admitted Ordinary Claim and Ordinary Claims may include accrued interest (if any) at the Effective Date.

Currency conversion

 

  (q) Where a Qualifying Scheme Creditors’ Qualifying Scheme Claim is expressed in a currency other than Dollars:

 

  (i) the Cash-Out Amount to which such Qualifying Scheme Creditor is entitled under the Schemes shall be calculated by using the average exchange rate between the origin currency and Dollars between 1 March 2014 and the Record Time; and

 

  (ii) the aggregate number of Shares and/or Convertible Bonds to which such Qualifying Scheme Creditor is entitled under the Schemes shall be calculated by using the average exchange rate between the origin currency and Dollars between 1 March 2014 and the Record Time.

Determination of Ordinary Claims

 

  (r) The Scheme Supervisors shall examine each Claim Form returned to them, such examination to include (without limitation) consideration of whether:

 

  (i) details of Ordinary Claims are adequately supported by any documentation submitted with the Claim Form;

 

  (i) details of the quantum of the Ordinary Claims are sufficient and the basis of calculation is reasonable and has been accurately applied; and

 

  (ii) there is any set-off to be applied to the claim.

 

  (s) Up to the Bar Date, the Scheme Supervisors may give notice to an Ordinary Claimant specifying further information or evidence that they reasonably require to assist them in agreeing its Ordinary Claim.

 

  (t) After the Bar Date, if the Scheme Supervisors do not agree with the Ordinary Claim, or do not consider the supporting information to be adequate, they shall notify the Ordinary Claimant of that fact and the reasons, as soon as reasonably practicable (taking into account the volume of Ordinary Claims received), and shall request any further information or evidence that would assist them in deciding upon the Ordinary Claim.

 

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  (u) The Ordinary Claimant shall respond within such reasonable time limit as the Scheme Supervisors may specify and shall similarly respond to any subsequent requests for information from the Scheme Supervisors.

 

  (v) If the Scheme Supervisors agree with the value of the Ordinary Claim, or agree with the Ordinary Claimant a value for which the whole or any part of the relevant Ordinary Claim should be Accepted as an Admitted Ordinary Claim, the Scheme Supervisors shall notify the Ordinary Claimant of their agreement, in writing, as soon as reasonably practicable following their determination. The Ordinary Claim (or part thereof, without prejudice to any Disputed Claim) will become an Admitted Ordinary Claim on the date the notice is sent.

 

  (w) If the Ordinary Claim is not Accepted in full by the Scheme Supervisors within the two calendar months after the Bar Date (or at such earlier time as the Scheme Supervisors shall determine or such later time to which the Scheme Supervisors and the Ordinary Claimant shall both agree or acquiesce) such part (if any) of the Ordinary Claim that is not Accepted shall become a Disputed Claim.

 

  (x) Where an Ordinary Claim (or part thereof) becomes a Disputed Claim, the Scheme Supervisors shall forthwith notify the Ordinary Claimant, in writing, that the whole or part of its Ordinary Claim has become a Disputed Claim including brief reasons for the dispute.

Dealing with Disputed Ordinary Claims

 

  (y) An Ordinary Claimant who:

 

  (i) receives notice that the whole or part of its Ordinary Claim has become a Disputed Claim;

 

  (ii) receives notice of an estimated value of its contingent Ordinary Claim with which it disagrees; or

 

  (iii) does not receive within the two calendar months after the Bar Date or within such other period as might be agreed in accordance with paragraph 7.16(w) above either (i) notice in accordance with paragraph 7.16(v) above that its Ordinary Claim is an Admitted Ordinary Claim or (ii) notice in accordance with paragraph 7.16(x) that the whole or part of its Ordinary Claim has become a Disputed Claim,

shall be entitled to commence Dispute Proceedings in the Grand Court or High Court, as applicable, seeking a determination of its Disputed Claim and serve such proceedings on LDK Solar on or before the date 21 days after (i) receipt of a notice from the Scheme Supervisors under paragraph 7.16(y), or (ii) the elapse of the period of two calendar months commencing on the Bar Date or such other period as might be agreed in accordance with paragraph 7.16(w) above without the Ordinary Claimant having received from the Scheme Supervisors either of the notices specified in paragraph 7.16(y)(iii).

 

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If a final judgment is given in Dispute Proceedings, the Disputed Claim will become an Admitted Ordinary Claim for the amount set out in the judgment, or in the case of a judgment which values the Disputed Claim at zero, shall give no entitlement to any payment or distribution under the Schemes in respect of the Disputed Claim.

 

  (z) If any legal or other costs are awarded against LDK Solar in respect of Dispute Proceedings, such amounts shall be payable by LDK Solar to the relevant Scheme Creditor on an indemnity basis, such costs to be taxed by the Grand Court or assessed by the High Court, as applicable, if not agreed. If any legal or other costs are awarded in LDK Solar’s favour in respect of Dispute Proceedings, such amounts shall be payable to LDK Solar in full and LDK Solar may set off such amounts against any liability to pay (at the discretion of the Scheme Supervisors) the Ordinary Cash Out Amount and/or Ordinary Non-Cash Scheme Consideration to the relevant Ordinary Scheme Creditor.

 

  (aa) If the Ordinary Claimant does not commence Dispute Proceedings and serve those proceedings on LDK Solar on or before the deadline applicable pursuant to paragraph 7.16(y), its Disputed Claim shall become an Admitted Ordinary Claim at the value Accepted by the Scheme Supervisors or (b) , if (i) rejected entirely by the Scheme Supervisors or (ii) no notice was received in accordance with paragraph 7.16(y), shall give no entitlement to a payment or distribution under the Schemes.

 

  (bb) Nothing in paragraph 7.16 shall prevent the Scheme Supervisors from agreeing on behalf of LDK Solar in writing with an Ordinary Scheme Creditor the value of the Liability to which an unliquidated or unascertained Ordinary Claim relates, in which case the unliquidated or unascertained Ordinary Claim shall become an Admitted Ordinary Claim for the amount agreed.

 

  (cc) The Scheme Supervisors shall have the power to agree and make any compromise, settlement or arrangement on behalf of LDK Solar with any Ordinary Claimant in respect of a Disputed Claim and/or in connection with Dispute Proceedings.

Scheme Payments and Distributions

 

  (dd) On the Payment Date, LDK Solar shall pay:

 

  (i) to those Senior Note Scheme Creditors who have elected or are deemed to have elected to receive the Senior Note Cash Out Amount, the Senior Note Cash Out Amount to which they are entitled (if any), calculated in accordance with the terms of the Schemes;

 

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  (ii) to those Preferred Obligation Scheme Creditors who have elected or are deemed to have elected to receive the Preferred Obligation Cash Out Amount, the Preferred Obligation Cash Out Amount to which they are entitled, calculated in accordance with the terms of the Schemes; and

 

  (iii) to those Admitted Ordinary Scheme Creditors who have elected or are deemed to have elected to receive the Ordinary Cash Out Amount, the Ordinary Cash Out Amount to which they are entitled, calculated in accordance with the terms of the Schemes.

 

  (ee) On the Issue Date, LDK Solar shall:

 

  (i) issue and allot to those Scheme Creditors who have elected to receive Non-Cash Scheme Consideration, the aggregate number of Scheme Shares to which they are entitled, as calculated in accordance with the terms of the Schemes;

 

  (ii) issue the 2018 Convertible Bonds in accordance with the terms of the Schemes, and the 2018 Convertible Bond Indenture. On the Issue Date LDK Solar shall issue the 2018 Convertible Bonds in global registered form through the Clearing Systems as follows:

 

  (A) to those Senior Note Scheme Creditors who have elected or are deemed to have elected to receive Senior Note Non-Cash Scheme Consideration, in the aggregate principal amount of the 2018 Convertible Bonds to which they are entitled, as calculated in accordance with the Schemes; and

 

  (B) to those Admitted Ordinary Scheme Creditors who have elected or are deemed to have elected to receive Ordinary Non-Cash Scheme Consideration, in the aggregate principal amount of the 2018 Convertible Bonds to which they are entitled, as calculated in accordance with the Schemes;

 

  (iii) issue the Preferred Convertible Bonds in accordance with the terms of the Schemes, and the Preferred Convertible Bond Indenture. On the Issue Date LDK Solar shall deposit the Preferred Convertible Bonds in global registered form with the Common Depositary for the Clearing Systems or its nominee. The Preferred Convertible Bonds will be allocated to relevant accounts in the Clearing Systems of those Preferred Obligation Scheme Creditors who have elected or are deemed to have elected to receive Preferred Obligation Non-Cash Scheme Consideration, in the aggregate principal amount of the Preferred Convertible Bonds to which they are entitled, as calculated in accordance with the Schemes.

 

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Trust in relation to Scheme Consideration

 

  (ff) LDK Solar will not issue any Non-Cash Scheme Consideration to a Qualifying Scheme Creditor (or its Designated Recipient) if that Qualifying Scheme Creditor:

 

  (i) is a Disqualified Person or a Prohibited Transferee, unless it has nominated a Designated Recipient that is not a Disqualified Person or Prohibited Transferee; or

 

  (ii) is a Senior Note Scheme Creditor or a CN Holder, and the Information Agent has not received a validly completed Account Holder Letter including a validly completed Distribution Confirmation Deed from or on behalf of that Senior Note Scheme Creditor or CN Holder (or their Designated Recipients) prior to the Voting Instruction Deadline (or such time following the Voting Instruction Deadline as LDK Solar may decide in its absolute discretion);

 

  (iii) is not a Senior Note Scheme Creditor or a CN Holder and LDK Solar has not received a validly completed Distribution Confirmation Deed from or on behalf of that Qualifying Scheme Creditor (or its Designated Recipient) prior to the Record Time (or such time following the Record Time as LDK Solar may decide in its absolute discretion).

 

  (gg) If a Qualifying Scheme Creditor is not issued with its Non-Cash Scheme Consideration for the reasons above, its entitlement to Non-Cash Scheme Consideration will be issued to the Non-Cash Scheme Consideration Trustee, who will hold the Non-Cash Scheme Consideration entitlement on trust in the Non-Cash Scheme Consideration Trust for the relevant Qualifying Scheme Creditor (the “Trust Securities”) for a period of five years from the Effective Date (the “Holding Period”).

 

  (hh) If a Qualifying Scheme Creditor’s entitlement to Non-Cash Scheme Consideration has been issued to the Non-Cash Scheme Consideration Trustee, and that Qualifying Scheme Creditor:

 

  (i) being a Disqualified Person or a Prohibited Transferee fails to provide the Information Agent and LDK Solar with the required details of a Designated Recipient who is not a Disqualified Person or a Prohibited Transferee;

 

  (ii) fails to provide the Information Agent or LDK Solar (as applicable) with a validly completed Distribution Confirmation Deed);

within the Holding Period, and in each case, a request in writing to transfer the relevant Trust Securities to it (or its Designated Recipient) within the Holding Period then, upon the expiration of the Holding Period, the Non-Cash Scheme Consideration Trustee is authorised to sell such Non-Cash Scheme Consideration to a third party on arms length terms, and the net cash proceeds of such sale (after the deduction of the reasonable costs and expenses of the Non-Cash Scheme Consideration Trustee in respect of such sale) shall be paid to the relevant Qualifying Scheme Creditor, subject to receipt from such Qualifying Scheme Creditor of a validly completed Trust Distribution Deed.

 

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  (ii) If any Qualifying Scheme Creditor being a beneficiary of the Non-Cash Scheme Consideration Trust requests in writing that the Non-Cash Scheme Consideration Trustee sell the Trust Securities to which it is beneficially entitled, the Non-Cash Scheme Consideration Trustee will use its reasonable endeavours to sell the Trust Securities and account to that Qualifying Scheme Creditor for the net proceeds of sale (after the deduction of the reasonable costs and expenses of the Non-Cash Scheme Consideration Trustee in respect of such sale), provided that a validly completed Account Holder Letter or Proxy Form along with a validly completed Trust Distribution Deed has been submitted to the Information Agent or to LDK Solar by or on behalf of that Qualifying Scheme Creditor.

 

  (jj) If it is not possible to pay net cash proceeds of a sale of Non-Cash Scheme Consideration to the relevant Qualifying Scheme Creditor, then the Non-Cash Scheme Consideration Trustee shall apply the net cash proceeds of sale in its absolute discretion (including paying the monies into Court or gifting the same to such children’s charity as the Non-Cash Scheme Consideration Trustee thinks fit). The Non-Cash Scheme Consideration Trustee shall have the power to appoint an additional or replacement trustee over the Trust Securities at any time, subject to any additional or replacement trustee agreeing to be bound by the terms of the Schemes.

 

  (kk) If a Scheme Creditor has failed to provide its Settlement Instructions in the relevant Account Holder Letter or Distribution Confirmation Deed for payment of a Cash Out Amount, or such Settlement Instructions are incomplete in any way, including in relation to the provision of any applicable “know your client” or “anti-money laundering information”, LDK Solar shall not be required to make any payment to such Scheme Creditor unless and until such information is duly provided.

Releases

 

  (ll) Each of the Scheme Creditors on behalf of itself and each of its predecessors, successors and assigns (collectively, the “Scheme Creditor Releasing Parties”) to the fullest extent permitted by law, shall and shall be deemed to completely and forever release, waive, void, acquit, forgive, extinguish and discharge unconditionally each of:

 

  (i) the Senior Note Guarantors, their Personnel and Affiliates;

 

  (ii) the Preferred Obligors, their Personnel and Affiliates;

 

  (iii) the Cayman Scheme Companies, their Personnel and Affiliates;

 

  (iv) the Released Advisers, their Personnel and Affiliates; and

 

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  (v) the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, in such capacities, and their Personnel and Affiliates,

and each of their predecessors, successors and assigns, and in their capacities as such from any and all Claims and/or Liabilities arising prior to the Effective Date or that are or may be based in whole or in part on any act, omission, transaction, event or other circumstance taking place or existing on or prior to the Effective Date (or in respect of paragraph 7.16(ll)(v) only, Claims and/or Liabilities which are based on actions taken by the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, in such capacities, and their Personnel and Affiliates pursuant to the Scheme Steps, whether before or after the Effective Date), (including any and all Scheme Claims, including Claims and/or Liabilities arising in respect of guarantees of the Senior Notes (including the Senior Note Guarantees) against the Senior Note Guarantors and any and all Preferred Documents Claims against any Preferred Obligor) except for:

 

  (A) any and all claims or causes of action arising from or relating to fraud, wilful default or wilful misconduct;

 

  (B) any and all Excluded Claims;

 

  (C) any and all Reserved Claims; and

 

  (D) in the case of the Senior Note Scheme Creditors, any and all Claims or Liabilities they have in relation to the Senior Note Guarantors, their Affiliates (other than LDK Solar), the Personnel of the Senior Note Guarantors or the Personnel of their Affiliates (other than the Personnel of LDK Solar in their capacity as such) which do not relate to, arise in respect of, or are not in connection with the Senior Notes, the Senior Note Indenture, or the Senior Note Guarantees;

 

  (E) in the case of the Preferred Obligation Scheme Creditors, any and all Claims or Liabilities they have in relation to the Preferred Obligors, their Affiliates (other than the Scheme Companies), the Personnel of the Preferred Obligors (other than the Personnel of the Scheme Companies in their capacity as such), or the Personnel of the Affiliates of the Preferred Obligors (other than the Personnel of the Scheme Companies in their capacity as such) which do not relate to, arise in respect of, or are not in connection with the Preferred Documents or Preferred Obligations;

 

  (F) in the case of the Ordinary Scheme Creditors any and all Claims or Liabilities they have in relation to Group Companies other than LDK Solar, or the Personnel or Affiliates of such Group Companies (other than LDK Solar), which do not relate to, arise in respect of, or are not in connection with their Ordinary Claims or the subject matter thereof;

 

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  (G) any and all Claims against or Liabilities of any Onshore Operating Entities not being Preferred Obligors and not arising out of or relating to the Preferred Documents;

 

  (H) the liability of any Released Adviser, their Personnel and Affiliates arising under a duty of care to its client;

 

  (I) any Claims against or Liabilities of any Released Adviser, their Personnel and Affiliates that are unrelated to the RSAs, the Restructuring Transactions, the Schemes, the negotiation or preparation thereof, or to any related matter; and

 

  (J) in the case of the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary and their Personnel and Affiliates, any and all Claims or Liabilities which do not relate to or arise in respect of the Senior Notes, the Senior Note Indenture, the Senior Note Guarantees, the CNs or the CN Indentures,

provided that the foregoing shall not prejudice or impair any right of any Scheme Creditor Releasing Party created under the Cayman Scheme or the Hong Kong Scheme.

 

  (mm) Each of the Cayman Scheme Companies, the Senior Note Guarantors and the Preferred Obligors on behalf of itself and each of its predecessors, successors and assigns (collectively, the “LDK Releasing Parties”) to the fullest extent permitted by law, shall and shall be deemed to completely and forever release, waive, void, acquit, forgive, extinguish and discharge unconditionally each of:

 

  (i) the Senior Note Scheme Creditors their Personnel and Affiliates;

 

  (ii) the Preferred Obligation Scheme Creditors their Personnel and Affiliates;

 

  (iii) the Senior Note Guarantors and their Personnel;

 

  (iv) the Preferred Obligors and their Personnel;

 

  (v) the Cayman Scheme Companies and their Personnel;

 

  (vi) the Released Advisers, their Personnel and Affiliates; and

 

  (vii) the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, in such capacities, and their Personnel and Affiliates;

 

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and each of their predecessors, successors and assigns and in their capacities as such from any and all Claims and/or Liabilities arising prior to the Effective Date or that are or may be based in whole or in part on any act, omission, transaction, event or other circumstance taking place or existing on or prior to the Effective Date (or in respect of Clause 41.2(g) only, Claims and/or Liabilities which are based on actions taken by the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, in such capacities, and their Personnel and Affiliates pursuant to the Scheme Steps, whether before or after the Effective Date), except for:

 

  (A) any and all claims or causes of action arising from or relating to fraud, wilful default or wilful misconduct;

 

  (B) any and all Excluded Claims;

 

  (C) in the case of the Senior Note Guarantors and their Personnel, any and all Claims or Liabilities which do not relate to or arise in respect of the Senior Notes, the Senior Note Indenture, or the Senior Note Guarantees;

 

  (D) in the case of the Preferred Obligors and their Personnel, any and all Claims or Liabilities which do not relate to or arise in respect of the Preferred Documents; and

 

  (E) in the case of the Scheme Companies and their Personnel, any and all Claims or Liabilities which do not relate to or arise in respect of the Preferred Documents, Senior Notes, the Senior Note Indenture, or the Senior Note Guarantees;

 

  (F) in the case of the Senior Note Scheme Creditors, their Personnel and Affiliates, any and all Claims or Liabilities which do not relate to or arise in respect of the Senior Notes, the Senior Note Indenture, or the Senior Note Guarantees;

 

  (G) in the case of the Preferred Obligation Scheme Creditors, their Personnel and Affiliates, any and all Claims or Liabilities which do not relate to or arise in respect of the Preferred Documents;

 

  (H) any and all Reserved Claims;

 

  (I) the liability of any Released Adviser, their Personnel and Affiliates arising under a duty of care to its client;

 

  (J) any Claims against or Liabilities of any Released Adviser, their Personnel and Affiliates that are unrelated to the RSAs, the Restructuring Transactions, the Schemes, the negotiation or preparation thereof, or to any related matter; and

 

  (K) in the case of the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, and their Personnel and Affiliates, any and all Claims or Liabilities which do not relate to or arise in respect of the Senior Notes, the Senior Note Indenture, the Senior Note Guarantees, the CNs or the CN Indentures,

 

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provided that the foregoing shall not prejudice or impair any right of any LDK Releasing Party created under the Cayman Scheme or the Hong Kong Scheme.

 

  (nn) Each of the Scheme Creditor Releasing Parties and the LDK Releasing Parties shall and shall be deemed to completely and forever release, waive, void, acquit, forgive, extinguish and discharge unconditionally the JPLs (and any subsequently appointed joint provisional liquidator of LDK Solar) and all of their and their respective firms’ and companies’ current and former direct and indirect affiliates, equity holders, partners, members, managing members, officers, directors, employees, advisors, principals, attorneys, counsel, professional advisors, accountants, investment bankers, consultants, agents, and representatives (including their respective affiliates) from any Claims or Liabilities that arise, are or may be based in whole or part on any act, omission, transaction, event or other circumstance taking place or existing on or prior to the prior to the date the JPLs vacate office, except for any claims or causes of action arising from or relating to fraud, wilful default or wilful misconduct.

 

7.17 Assignments and transfers

 

  (a) The Scheme Companies shall be under no obligation to recognise any assignment or transfer of any Scheme Claim, whether before or after the Record Time, for the purposes of determining entitlements under the Schemes, save where any of the Scheme Companies has received before the Record Time actual notice in writing from the parties to such assignment or transfer of the assignment or transfer, in which case the Scheme Companies shall recognise such assignment or transfer for the purposes of determining entitlements under the Schemes (if any).

 

  (b) Where the Scheme Companies have received from the relevant parties written notice of an assignment or transfer of a Qualifying Scheme Claim after the Record Time, the Scheme Companies may, in the absolute discretion of the Scheme Supervisors and subject to such evidence as they may reasonably require, agree to recognise such assignment or transfer for the purposes of determining entitlements under the Schemes.

 

7.18 Mechanical Scheme Documents

The mechanics of the Schemes described in paragraphs 7.12 and 7.17 refer to certain documents which are described below.

Senior Note Trustee Instruction

 

  (a) Pursuant to the Senior Note Trustee Instruction, the Senior Note Trustee shall upon receipt of the Senior Note Trustee Instruction be irrevocably authorised and instructed to, on the Effective Date, mark down and cancel the Senior Notes and take such steps as may be necessary to mark down and cancel the Senior Notes.

 

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Common Depository Instruction

 

  (b) Pursuant to the Common Depository Instruction, the Common Depositary shall upon receipt of the Common Depositary Instruction be irrevocably authorised and instructed to, upon receipt of corresponding instructions to that effect from the Clearing Systems on or as soon as practicable after the Effective Date deliver the Senior Global Note to the Registrar, for cancellation and take such other action as may be required to effect the cancellation and discharge of the Senior Notes under the Senior Note Indenture.

Clearing System Instruction

 

  (c) Pursuant to the Clearing System Instruction, the Clearing Systems shall upon receipt of the Clearing System Instruction be irrevocably authorised and instructed to deliver the CN Global Notes to the CN Registrar, for cancellation and to take such other action as may be required to effect the cancellation and discharge of the CNs.

Deed of Release

 

  (d) The Deed of Release is a deed pursuant to which the Scheme Companies, the JPLs and the Scheme Creditors agree to provide the releases referred to in paragraph 7.16(ll) to 7.16(nn) of this Explanatory Statement.

 

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PART 3

This section contains a brief overview of the Chapter 11 Plan. The summary information contained herein does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by references to, the more detailed information presented elsewhere in the Disclosure Statement and the Chapter 11 Plan.

A copy of the Chapter 11 Plan and the Disclosure Statement will be circulated to Senior Note Scheme Creditors only. The circulation of such material will occur around the time the Schemes and this Explanatory Statement are made available to the Senior Note Scheme Creditors.

 

8. OVERVIEW OF THE CHAPTER 11 PLAN

 

8.1 Overview of Chapter 11 of the Bankruptcy Code

 

  (a) Chapter 11 is the principal business reorganisation chapter of the Bankruptcy Code. Under chapter 11, a debtor is authorised to reorganise its business for the benefit of itself, its creditors and its equity security holders. In addition to permitting the rehabilitation of a debtor, another goal of chapter 11 is to promote the equality of treatment of similarly situated creditors and equity interest holders with respect to the distribution of a debtor’s assets.

 

  (b) The commencement of a chapter 11 case creates an estate that is comprised of all of the legal and equitable interests of the debtor as of the commencement date. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a “debtor-in-possession”.

 

8.2 Prepackaged Plans of Reorganisation Generally

 

  (a) The consummation of a plan of reorganisation is the principal objective of a chapter 11 reorganisation case. A plan of reorganisation sets forth the means for satisfying claims against and equity interests in the debtor.

 

  (b) The Chapter 11 Plan discussed herein is colloquially referred to in the United States as a “prepackaged” chapter 11 plan. In “prepackaged” Chapter 11 Cases, like the ones contemplated to be commenced by the Prospective US Debtors, agreement is reached among prospective debtors and one or more classes of their creditors on the terms of a restructuring before the bankruptcy filing occurs, and the bankruptcy cases are used to implement the agreed-upon plan and to address the claims of creditors with whom there is no agreement. The votes of creditors with whom the prospective debtors have agreed are solicited before the bankruptcy filing, and the plan “confirmation” process starts immediately upon filing the Chapter 11 Cases. “Confirmation” is akin to the sanctioning of a scheme of arrangement, and is the term used for approval of a chapter 11 plan by a Bankruptcy Court and entering it into an order of the Bankruptcy Court.

 

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8.3 Purpose of the Chapter 11 Plan and Overview of its Terms

 

  (a) The Chapter 11 Plan proposed by the Prospective US Debtors is an integral part of the Group’s global restructuring. The Senior Note RSA discussed in paragraph 6.4 of Part 1 (Background to the Schemes and the Chapter 11 Plan) provides, among other things, that the Group parties to the Senior RSA will take all steps as are reasonably necessary to (i) support the Cayman Scheme, (ii) support the Chapter 11 Plan (as defined in the Senior Note RSA), and (iii) support the Recognition Filing. The Chapter 11 Plan is the critical component of the second step in the aforementioned list.

 

  (b) The Prospective US Debtors have not commenced Chapter 11 Cases as of the date of this Explanatory Statement. Following the Chapter 11 Plan solicitation period, if the Senior Note Scheme Creditors vote to accept the Chapter 11 Plan in a number and dollar amount sufficient to satisfy the requirements for class acceptance of the Chapter 11 Plan in accordance with the Bankruptcy Code, the Prospective US Debtors intend, among other things, to commence the Chapter 11 Cases and pursue confirmation of the Chapter 11 Plan, all in accordance with the Senior Note RSA.

 

  (c) The Chapter 11 Plan is a plan of reorganisation for only three US entities, being (i) the US Senior Note Guarantors comprising LDK Solar USA and LDK Solar Tech USA; and (ii) LDK Solar Systems. The centrepiece of the Chapter 11 Plan is approving the compromise of the guarantee obligations that LDK Solar USA, Inc. and LDK Solar Tech USA. have with respect to the Senior Notes. By voting in favour of the Schemes, or by voting against the Schemes, Senior Note Scheme Creditors will be casting the same vote for or against with respect to the Chapter 11 Plan. If the Chapter 11 Plan is approved by Senior Note Scheme Creditors and confirmed by the Bankruptcy Court, the Prospective US Debtors’ guarantee obligations on the Senior Notes (along with the obligations of all guarantors of the Senior Notes) will be fully satisfied in exchange for the Senior Note Scheme Consideration. Notably, no other creditors or interest holders of the Prospective US Debtors will have their claims or interests modified or altered by the Chapter 11 Plan.

 

  (d) Importantly, though, the Chapter 11 Plan contains certain releases which are customary to U.S. plans of reorganisation. The Chapter 11 Plan contains two types of releases: (1) releases by the Prospective US Debtors of claims the Prospective US Debtors may possess against the “Released Parties” under the Chapter 11 Plan, and (2) voluntary releases by creditors that such creditors may possess against the “Released Parties” under the Chapter 11 Plan. The “Released Parties” are “in each case solely in their capacities as such, (i) the Debtors, the Reorganised Debtors, and their financial advisers, attorneys, accountants, investment banker, and consultants, (ii) the Consenting Senior Note Scheme Creditors, (iii) the JPLs, and (iv) the Related Persons of the Persons listed in subparts (ii) and (iii) of this definition” (each as defined in the Chapter 11 Plan). The releases by the Prospective US Debtors apply to claims that are held by only the Prospective US Debtor Entities, and not claims held by any of the Prospective US Debtors’ affiliates (such as, for example LDK Solar). In addition, under the Chapter 11 Plan, a creditor has the option of electing not to grant the releases if the creditor so chooses, and, moreover, the creditors are only releasing claims they may hold in connection with the Prospective US Debtors and the Chapter 11 Plan process. Further information on the aforesaid optional release available to Senior Note Scheme Creditors is set out in the Senior Solicitation Packet.

 

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PART 4

 

9. SENIOR NOTE SCHEME CREDITORS

 

9.1 Are you a person with an interest in the Senior Notes?

 

  (a) The following persons have interests in the Senior Notes:

 

  (i) Account Holders: You are an Account Holder if you are recorded directly in the books or other records maintained by the Senior Clearing System under their electronic systems, as holding an interest at the Record Time in the Senior Global Notes in an account with that Senior Clearing System.

 

  (ii) Intermediaries: You are an Intermediary if you hold an interest at the Record Time in any Senior Notes on behalf of another person or other persons and you do not hold that interest as an Account Holder. An Intermediary is commonly a bank or a brokerage house which does not have an account with a Senior Clearing System.

 

  (iii) Senior Note Scheme Creditors: You are a Senior Note Scheme Creditor if you have the ultimate economic interest, whether as principal or beneficiary or otherwise, in the Senior Notes held in global form through the Senior Clearing System at the Record Time and have a right, upon satisfaction of certain conditions, to be issued definitive notes in accordance with the terms of the Senior Notes. For the avoidance of doubt, an Account Holder may also be a Senior Note Scheme Creditor.

 

  (iv) The Common Depositary and the Senior Note Trustee.

Scheme Note Scheme Creditors are entitled to take, or direct the taking of, certain actions in respect of the Schemes and the Chapter 11 Plan.

 

  (b) The Bank of New York Mellon, in its capacity as both the Common Depositary and the Senior Note Trustee, has confirmed to LDK Solar that it will not vote in respect of the Senior Notes at the CI Senior Note Meeting, the HK Senior Note Meeting or on the Chapter 11 Plans, unless instructed to do so by the holders of Senior Notes in accordance with the Senior Note Indenture. In order to ensure your vote is counted, you are therefore strongly encouraged to follow the procedure set out in the Senior Solicitation Packet.

 

  (c) Account Holders are not Scheme Creditors unless an Account Holder has the ultimate economic interest, whether as principal or beneficiary or otherwise, in the Senior Notes held in global form through the Senior Clearing System at the Record Time and a right to the issue of definitive notes, as described above. However, as set out in this Part 4 (Senior Note Scheme Creditors) and Appendix 12 (Senior Solicitation Packet), the assistance of Account Holders will be required, in accordance with their custodial duties, to attend to the following tasks:

 

  (i) To arrange for the Senior Notes to be blocked by the Custody Instruction Deadline, in accordance with the instructions set out in the Senior Solicitation Packet;

 

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  (ii) To arrange for facsimile or e-mail versions of the completed Account Holder Letter and Ballot containing the voting instructions of the Senior Note Scheme Creditors, to be sent to the Information Agent prior to the Voting Instruction Deadline, in accordance with the instructions set out in the Senior Solicitation Packet; and

 

  (iii) To arrange for signed originals of the completed Account Holder Letter and Ballot to be posted to the Information Agent within seven (7) days after the Voting Instruction Deadline.

 

  (d) In determining whether a particular person is the ultimate beneficial owner of any Senior Notes, and therefore a Senior Note Scheme Creditor, entitled to a particular principal amount of Senior Notes and related claims as aforesaid, the Chairperson may rely on such evidence and/or information and/or certification as it shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the absence of manifest error, be conclusive and binding on all concerned.

If you are a Senior Note Scheme Creditor you should read this Explanatory Statement carefully. If you are a Senior Note Scheme Creditor who is not an Account Holder you should contact your Account Holder (through any Intermediaries, if applicable) to ensure that your Account Holder takes the appropriate action described in paragraph 9.2 below and in the Senior Solicitation Packet.

 

  (e) The number of Senior Note Scheme Creditors voting and the votes cast by them will be taken into account for both value and numerosity purposes in relation to the Schemes and the Chapter 11 Plan.

 

  (f) Prior to the date of this Explanatory Statement, LDK Solar (amongst others) entered into the Senior Note RSA with Senior Note Scheme Creditors in respect of approximately 60% of the principal amount outstanding of the Senior Notes in aggregate. A summary of the terms of the Senior Note RSA is set out at paragraph 6.4 of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement. Senior Note Scheme Creditors that have not entered into the Senior Note RSA at the date of this Explanatory Statement may still do so and are requested to contact the JPLs using the contact details referred to in the Communications Policy.

 

  (g) For further information on the action to be taken by Senior Note Scheme Creditors and persons with an interest in the Senior Notes, Senior Note Scheme Creditors should refer to paragraph 9.2 of this Explanatory Statement and the Senior Solicitation Packet at Appendix 12 (Senior Solicitation Packet).

 

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The following diagram illustrates the relationship between certain persons with interests in the Senior Notes, which are held in global form through the Senior Clearing Systems:

 

 

LOGO

 

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9.2 Summary of actions to be taken by Senior Note Scheme Creditors and any person with an interest in the Senior Notes

SENIOR NOTE SCHEME CREDITORS ARE INVITED TO VOTE AT THE SENIOR NOTE MEETINGS AND ON THE CHAPTER 11 PLAN, BY DIRECTING THEIR ACCOUNT HOLDER TO COMPLETE AND DELIVER TO THE INFORMATION AGENT THE ACCOUNT HOLDER LETTER AND BALLOT SET OUT IN SCHEDULE 1 OF THE SENIOR SOLICITATION PACKET.

SENIOR NOTE SCHEME CREDITORS SHOULD NOTE THAT THE ACCOUNT HOLDER LETTER AND BALLOT ALSO PROVIDES VOTING INSTRUCTIONS TO HOLDERS OF THE SENIOR NOTE GUARANTEE CLAIM FOR THE PURPOSES OF VOTING ON THE CHAPTER 11 PLAN. SENIOR NOTE SCHEME CREDITORS ARE INVITED TO REFER TO THE CHAPTER 11 PLAN AND THE DISCLOSURE STATEMENT WHICH WILL BE ISSUED TO SENIOR NOTE SCHEME CREDITORS SEPARATELY TO THIS EXPLANATORY STATEMENT.

Detailed instructions on the actions which Senior Note Scheme Creditors, Intermediaries and Account Holders should take are set out in this Explanatory Statement and are summarised below.

Senior Note Scheme Creditors and any persons with an interest in the Senior Notes should read the full instructions set out in the Senior Solicitation Packet.

 

  (a) You should read this Explanatory Statement as a whole, in conjunction with the Senior Solicitation Packet. The Senior Solicitation Packet includes:

 

  (i) General guidance and instructions for Senior Note Scheme Creditors for voting at the Senior Note Meetings and on the Chapter 11 Plan.

 

  (ii) The Account Holder Letter and Ballot which contains the voting form relating to the Senior Note Meetings and for voting on the Chapter 11 Plan.

 

  (iii) The Capitalisation Request Form, being the form Senior Note Scheme Creditors complete in order to elect the Cash Option or the Non-Cash Option.

 

  (iv) The Designated Recipient Form, being the form Senior Note Scheme Creditors complete in order to appoint a Designated Recipient.

 

  (v) The Distribution Confirmation Deed, being a Deed whereby Senior Note Scheme Creditors must confirm (amongst other things): (A) its Settlement Instructions; and (B) that it may legally and lawfully be issued with the Non-Cash Scheme Consideration.

Information on the steps Scheme Creditors are required to take in completing the Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Deed are set out in Part 7 (Scheme Consideration Elections) and in the Senior Solicitation Packet.

 

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Actions to be taken in relation to the Schemes and the Chapter 11 Plan

 

  (b) Each Senior Note Scheme Creditor that wishes to vote at the Senior Note Meetings and on the Chapter 11 Plan, will be required to ensure that its Account Holder instructs the relevant Senior Clearing System in which the Senior Notes which are the subject of the Account Holder Letter and Ballot are held to block those Senior Notes. This can be effected by giving Custody Instructions to that effect to the relevant Senior Clearing System prior to the Custody Instruction Deadline, being 11:00am, 14 October 2014. The procedure for doing this is described in paragraph 2.2 of the Senior Solicitation Packet.

 

  (c) If you are a Senior Note Scheme Creditor that is not an Account Holder and wish to vote at the Senior Note Meetings and on the Chapter 11 Plan, you should direct your Account Holder to complete the appropriate parts of the Account Holder Letter and Ballot set out in Schedule 1 to the Senor Solicitation Packet and deliver the completed Account Holder Letter and Ballot as soon as possible to the Information Agent and, in any event, so as to be received by the Voting Instruction Deadline, being 11:00 a.m. (Cayman Islands time) on 15 October 2014.

 

  (d) If you are a Senior Note Scheme Creditor that is an Account Holder and wish to vote at the Senior Note Meetings and on the Chapter 11 Plan, you should complete the appropriate parts of the Account Holder Letter and Ballot set out in Schedule 1 to the Senior Solicitation Packet and deliver the completed Account Holder Letter and Ballot as soon as possible to the Information Agent and, in any event, so as to be received by the Voting Instruction Deadline, being 11:00 a.m. (Cayman Islands time) on 15 October 2014.

 

  (e) Failure to deliver a valid Account Holder Letter and Ballot on behalf of a Senior Note Scheme Creditor by the Voting Instruction Deadline will mean that the voting instructions contained in that Account Holder Letter and Ballot will be disregarded for the purposes of voting in respect of the Chapter 11 Plan and the relevant Senior Note Scheme Creditor will, subject to the Chairperson’s discretion, not be entitled to vote at the Senior Note Meetings. An Account Holder may complete and submit an Account Holder Letter and Ballot on behalf of a relevant Senior Note Scheme Creditor if the Account Holder has authority to do so.

 

  (f) The Schemes require the approval of a majority in number representing at least 75% in value of the Senior Note Scheme Creditors present and voting (in person, by a duly authorised representative, if a corporation, or by proxy) at the Senior Note Meetings, being:

 

  (i) The CI Senior Note Meeting to be held on 16 October 2014 at 8:20pm (Cayman Islands time)/ 17 October 2014 at 9.20am (Hong Kong time); and

 

  (ii) The HK Senior Note Meeting to be held on 16 October 2014 at 9:10pm (Cayman Islands time)/ 17 October 2014 at 10:10am.

 

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  (g) It is important that as many votes as possible are cast at the Senior Note Meetings and on the Chapter 11 Plan so that the Grand Court, the High Court and the Bankruptcy Court may be satisfied that there is a fair and reasonable representation of opinion of Senior Note Scheme Creditors at the Senior Note Meetings. You are therefore strongly urged to complete and sign or direct your Account Holder to complete and sign the relevant parts of your Account Holder Letter and Ballot.

 

  (h) The amount of the Scheme Claims of each Senior Note Scheme Creditor which submits a valid Account Holder Letter and Ballot in respect of the Senior Notes will be calculated for voting purposes as at the Record Time based on information confidentially provided to LDK Solar. Solely with respect to the Schemes, this information will be used by the Chairperson to determine whether each resolution is passed at the Senior Note Meetings. Solely with respect to the Chapter 11 Plan, this information will be used by the Prospective US Debtors and the US Voting Agent to determine whether the Chapter 11 Plan has been accepted.

 

  (i) Each of the Common Depositary and the Senior Note Trustee has confirmed that it will not exercise any voting rights to which it may be entitled as a Scheme Creditor at the Senior Note Meetings unless instructed to do so in accordance with the Senior Note Indenture.

 

  (j) Completed Account Holder Letters and Ballot should be delivered to the Information Agent. An Account Holder Letter and Ballot should not in any circumstances be delivered to the Common Depositary, the Senior Note Trustee, or any of the Scheme Companies. Neither the Common Depositary, the Senior Note Trustee, the Information Agent, LDK Solar nor any member of the Group and any of their respective Subsidiaries, officers, directors or employees or any other person will be under any duty to give notification of any defects, irregularities or delays in any Account Holder Letter and Ballot, nor will any of such entities or persons incur any liability for failure to give such notification.

 

  (k) A Senior Note Scheme Creditor on whose behalf a duly completed Account Holder Letter and Ballot is lodged prior to the Voting Instruction Deadline may still attend the Senior Note Meetings and vote for or against the Schemes or the Chapter 11 Plan.

Completed Account Holder Letters and Ballots should be delivered to the Information Agent as soon as possible in accordance with the Communications Policy as set out in Section 5 (Communications Policy) of this Explanatory Statement and in any event before the Voting Instruction Deadline being 11:00 a.m. (Cayman Islands time) on 15 October 2014.

If you are in any doubt as to what action you should take in connection with this Explanatory Statement, the proposals contained in it or the documents that accompany it, you are recommended to seek your own independent advice immediately from your legal, financial, tax or other independent adviser.

 

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PART 5

 

10. PREFERRED OBLIGATION SCHEME CREDITORS

Detailed instructions on the actions to be taken by the Preferred Obligation Scheme Creditors are set out in this Part 5 (Preferred Obligation Scheme Creditors) and the Preferred Solicitation Packet.

 

10.1 Are you a Preferred Obligation Scheme Creditor?

The Preferred Obligation Scheme Creditors are those creditors who are holders of the Preferred Obligations issued in accordance with the terms of the Subscription Agreement and the Shareholders Agreement. As at the date of this Explanatory Statement, the following parties are Preferred Obligation Scheme Creditors:

 

  (a) CDB International;

 

  (b) Excel Rise;

 

  (c) Prosper East;

 

  (d) New Lane; and

 

  (e) Apollo.

If you are a Preferred Obligation Scheme Creditor you should read this Explanatory Statement carefully to ensure that you take the appropriate action described in the section of this Part 5 (Preferred Obligation Scheme Creditors) and the Preferred Solicitation Packet.

 

10.2 Summary of actions to be taken by the Preferred Obligation Scheme Creditors

The following are the key actions that the Preferred Obligation Scheme Creditors are required to take and the key aspects of the implementation of the Schemes:

 

  (a) You should read this Explanatory Statement as a whole, in conjunction with the Preferred Solicitation Packet. The Preferred Solicitation Packet includes:

 

  (i) General guidance and instructions for Preferred Obligation Scheme Creditors for voting at the Preferred Obligation Meetings.

 

  (ii) The Preferred Proxy Form which contains the voting form relating to the Preferred Obligation Meetings.

 

  (iii) The Capitalisation Request Form, being the form Preferred Obligation Scheme Creditors complete in order to elect the Cash Option or the Non-Cash Option.

 

  (iv) The Designated Recipient Form, being the form Preferred Obligation Scheme Creditors complete in order to appoint a Designated Recipient.

 

  (v) The Distribution Confirmation Deed, being a Deed whereby Preferred Obligation Scheme Creditors confirm (amongst other things): (A) its Settlement Instructions; and (B) that it may legally and lawfully be issued with the Non-Cash Scheme Consideration.

 

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Information on the steps Scheme Creditors are required to take in completing the Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Deed are set out in Part 7 (Scheme Consideration Elections) and in the Preferred Solicitation Packet.

Actions to be taken in relation to the Schemes

 

  (b) Any Preferred Obligation Scheme Creditor may appoint a proxy to attend to vote on its behalf at the Preferred Obligation Meetings, comprising:

 

  (i) the LDK Solar CI Preferred Meeting;

 

  (ii) the LDK Silicon CI Preferred Meeting;

 

  (iii) the LDK Solar HK Preferred Meeting;

 

  (iv) the LDK Silicon HK Preferred Meeting; and

 

  (v) the LDK SH Preferred Meeting.

 

  (c) Unless a Preferred Obligation Scheme Creditor is an individual, it must complete and return the Preferred Proxy Form in order to be able to vote at the Preferred Obligation Meetings. A proxy must be an individual person and may be a director or officer of the relevant Preferred Obligation Scheme Creditor (if a corporation), or may be some other individual person (including the Scheme Supervisors), whether an Preferred Obligation Scheme Creditor or not.

 

  (d) If you are an Preferred Obligation Scheme Creditor and wish to vote at the Preferred Obligation Meetings, you should complete the Preferred Proxy Form and elect whether to:

 

  (i) attend and vote at the Preferred Obligation Meetings in person, or appoint someone else as your proxy to attend and vote at the Preferred Obligation Meetings in person on your behalf (in which case, you can also specify whether you wish your proxy to vote at its discretion or to vote in accordance with your instructions); or

 

  (ii) instruct the Chairperson as your proxy to cast your vote in accordance with your instructions.

 

  (e) You should return the completed Preferred Proxy Form as soon as possible to the JPLs in accordance with the Communications Policy, and in any event, so as to not be received by the Voting Instruction Deadline.

 

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  (f) The Cayman Scheme requires the approval of a majority in number representing at least 75% in value of the Preferred Obligation Scheme Creditors present and voting (in person, by a duly authorised representative, if a corporation, or by proxy) at the following meetings:

 

  (i) the LDK Silicon CI Preferred Meeting to be held on 16 October 2014 at 8:00pm (Cayman Islands time)/ 17 October 2014 at 9:00am (Hong Kong time); and

 

  (ii) the LDK Solar CI Preferred Meeting to be held on 16 October 2014 at 8:10pm (Cayman Islands time)/ 17 October 2014 at 9:10am (Hong Kong time).

 

  (g) The Hong Kong Scheme also requires the approval of a majority in number representing at least 75% in value of the Preferred Obligation Scheme Creditors present and voting (in person, by a duly authorised representative, if a corporation, or by proxy) at the following meetings:

 

  (i) the LDK Silicon HK Preferred Meeting to be held on 16 October 2014 at 8:50pm (Cayman Islands time)/ 17 October 2014 at 9:50am (Hong Kong time);

 

  (ii) the LDK SH Preferred Meeting to be held on 16 October 2014 at 9:00pm (Cayman Islands time)/ 17 October 2014 at 10:00am (Hong Kong time); and

 

  (iii) the LDK Solar HK Preferred Meeting to be held on 16 October 2014 at 9:20pm (Cayman Islands time)/ 17 October 2014 at 10:20am (Hong Kong time).

 

  (h) It is important that as many votes as possible are cast at the Preferred Obligation Meetings so that the Grand Court and the High Court be satisfied that there is a fair and reasonable representation of the Preferred Obligation Scheme Creditors at the Preferred Obligation Meetings. You are therefore strongly urged to sign and return your Preferred Proxy Form as soon as possible in accordance with the voting instructions in this Explanatory Statement.

If you are in any doubt as to what action you should take in connection with this Explanatory Statement, the proposals contained in it or the documents that accompany it, you are recommended to seek your own independent advice immediately from your legal, financial, tax or other independent advisers.

 

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PART 6

 

11. ORDINARY SCHEME CREDITORS

Detailed instructions on the actions to be taken by the Ordinary Scheme Creditors are set out in this Explanatory Statement including in the Ordinary Proxy Form set out below and at Appendix 14 (Ordinary Solicitation Packet).

 

11.1 Are you an Ordinary Scheme Creditor?

 

  (a) The Ordinary Scheme Creditors are those Scheme Creditors who hold a claim against LDK Solar, as at the Record Time, other than the following claims:

 

  (i) Senior Note Scheme Claims (as more fully described in Part 4 (Senior Note Scheme Creditors) of this Explanatory Statement;

 

  (ii) Preferred Obligation Scheme Claims (as more fully described in Part 5 (Preferred Obligation Scheme Creditors) of this Explanatory Statement;

 

  (iii) Preferred Documents Claim, being any Claim arising out or of in respect of the Shareholders’ Agreement and/ or the Subscription Agreement;

 

  (iv) Intercompany Claim, being any claim against either of the Cayman Scheme Companies by any Group Company other than Sunways AG or the Cayman Scheme Companies as more fully described in paragraph 14.10 of Part 9 (Overview of the Group) of this Explanatory Statement; and

 

  (v) An Excluded Claim, as set out in paragraph 11.1(c) below.

 

  (b) As at the date of this Explanatory Statement, the JPLs are aware of the following material claimants who assert claims against LDK Solar and who would fall within the class of Ordinary Scheme Creditors (and not any of its exclusions):

 

  (i) Sunways in respect of its claim set out in paragraphs 6.3(s) to 6.3(aa) of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement;

 

  (ii) The CN Holders, being those Scheme Creditors who are the holders of the CNs who have not entered into a CN Settlement Agreement in respect of their claims as set out in paragraphs 6.3(bb) to 6.3(ee) of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement. Further information on the claims of the CN Holders are set out in paragraph 11.2 below;

 

  (iii) The Restructured CN Holders, being a person with a beneficial interest as principal in the CNs held in global form through the Clearing Systems, as at the Record Time and who have entered into a CN Settlement Agreement. These claims are set out in more detail at paragraphs 6.3(bb) to 6.3(gg) of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement; and

 

  (iv) Tokyo Rope in respect of its alleged claim set out in paragraphs 6.3(hh) to 6.3(ii) of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement.

 

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  (c) The Excluded Claims comprise the following claims:

 

  (i) A Project Loan Claim, being a Claim under a series of loans granted to LDK Solar concerning four acquisition and project finance loans described in paragraph 14.9(u) of Part 9 (Overview of the Group) of this Explanatory Statement;

 

  (ii) Any Project Guarantee Claim, being a Claim under an unsecured guarantee granted by LDK Solar in favour of CDB concerning LDK Solar Europe’s obligations under various acquisition and project finance loans described in paragraph 14.9(v) of Part 9 (Overview of the Group) of this Explanatory Statement;

 

  (iii) Any EPC Guarantee Claim, being a Claim under the guarantee granted by LDK Solar in favour of CDB Jiangxi in connection with any liability of any borrower under any Specified EPC Facility Agreement. The EPC Facility Agreements comprise:

 

  (A) the White Rose Facility, being a US$15,000,000 term loan facility agreement between CDB Jiangxi and KDC Solar dated 8 March 2012; and

 

  (B) the Imclone Facility, being a US$22,400,000 term loan facility agreement between CDB Jiangxi and KDC Solar dated 27 December 2013;

 

  (iv) The Munich Re Claim, being a Claim against the Munich Re Defendants (including LDK Solar) as described in paragraph 6.3(kk) to 6.3(mm) of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement; and

 

  (v) The Employee Claims, being a Claim against LDK Solar in respect of any contract of employment concerning any employees of the Group. As set out at paragraph 6.3(qq) of Part 1 (Background to the Schemes and the Chapter 11 Plan) of this Explanatory Statement, the JPLs have received proofs of debt from two former employees of LDK Silicon who allege (amongst other things) that they entered into non-compete agreements with LDK Solar, which was breached by LDK Solar. The JPLs and the Directors dispute these claims.

 

11.2 The CN Holders

Are you a person with an interest in the CNs?

 

  (a) The following persons have interests in the CNs:

 

  (i) CN Account Holders: You are a CN Account Holder if you are recorded directly in the books or other records of the Clearing System under their electronic systems, as holding an interest at the Record Time in the CNs in an account with that Clearing System;

 

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  (ii) CN Intermediary: You are a CN Intermediary if you hold an interest at the Record Time in any CNs on behalf of another person and you do not hold that interest as a CN Account Holder. A CN Intermediary is commonly a bank or a brokerage house which does not have an account with a Clearing System;

 

  (iii) CN Holders: Subject to paragraph 11.2(b), you are a CN Holder if you have the ultimate economic interest, whether as principal or beneficiary or otherwise, in the CNs held in global form through the Clearing System at the Record Time and have a right, upon satisfaction of certain conditions, to be issued definitive notes in accordance with the terms of the CNs. For the avoidance fo doubt, a CN Account Holder may also be a CN Holder; and

 

  (iv) The CN Trustee.

 

  (b) A CN Holder shall not include those holders of the CNs who entered into a CN Settlement Agreement. The CN Settlement Agreements are listed in Appendix 34 (List of CN Settlement Agreements) to this Explanatory Statement.

 

  (c) The Bank of New York Mellon, in its capacity as the CN Trustee, has confirmed to LDK Solar that it will not vote in respect of the CNs at the LDK Solar CI Ordinary Meeting and the LDK Solar HK Ordinary Meeting, unless instructed to do so by the CN Holders in accordance with the CN Indenture. In order to ensure that your vote is counted, you are therefore strongly encouraged to follow the procedure set out in the Ordinary Solicitation Packet.

 

  (d) CN Account Holders are not Scheme Creditors unless a CN Account Holder has the ultimate economic interest, whether as principal or beneficiary or otherwise, in the CNs held in global form through the Clearing System at the Record Time and a right to the issue of definitive notes, as described above. However, as set out in this Part 6 (Ordinary Scheme Creditors) and Appendix 14 (Ordinary Solicitation Packet), the assistance of CN Account Holders will be required, in accordance with their custodial duties, to attend to the following tasks:

 

  (i) To arrange for the CNs to be blocked by the Custody Instruction Deadline, in accordance with the instructions set out in Part A of the Ordinary Solicitation Packet; and

 

  (ii) To arrange for facsimile or e-mail versions of the completed CN Account Holder Letter containing the voting instructions of the CN Holder, to be sent to the Information Agent prior to the Voting Instruction Deadline, in accordance with the instructions set out in the Ordinary Solicitation Packet.

 

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  (e) In determining whether a particular person is the ultimate beneficial owner of any CNs, and therefore a CN Holder, entitled to a particular principal amount of the CNs and related claims as aforesaid, the Chairperson may rely on such evidence and/or information and/or certification as it shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the absence of manifest error, be conclusive and binding on all concerned.

 

  (f) For further information on the action to be taken by CN Holders and persons with an interest in the CNs, see paragraph 11.3 of this Explanatory Statement and the Ordinary Solicitation Packet.

 

11.3 Summary of actions to be taken by the Ordinary Scheme Creditors

 

  (a) The actions that Ordinary Scheme Creditors will be required to take under the Schemes are subject to whether the Ordinary Scheme Creditor is:

 

  (i) A CN Holder, in which case, CN Holders should refer to the instructions set out in paragraph 11.3(b) to 11.3(i) below;

 

  (ii) An Ordinary Scheme Creditor that is not a CN Holder, in which case, these Ordinary Scheme Creditors should refer to the instructions set out in paragraph 11.3(j) to 11.3(q) below.

CN Holders

Detailed instructions on the actions which CN Holders, CN Intermediaries and CN Account Holders should take are set out in at Part A of the Ordinary Solicitation Packet and are summarised below.

CN Holders and any persons with an interest in the CNs should read the full instructions set out in Part A to the Ordinary Solicitation Packet.

 

  (b) You should read this Explanatory Statement as a whole, in conjunction with Part A of the Ordinary Solicitation Packet. The Ordinary Solicitation Packet includes:

 

  (i) General guidance and instructions for CN Holders for voting at the Ordinary Meetings.

 

  (ii) The CN Account Holder Letter which contains the voting form relating to the Ordinary Meetings.

 

  (iii) The Capitalisation Request Form, being the form Ordinary Scheme Creditors complete in order to elect the Cash Option or the Non-Cash Option.

 

  (iv) The Designated Recipient Form, being the form CN Holders complete in order to appoint a Designated Recipient.

 

  (v) The Distribution Confirmation Deed, being a Deed whereby CN Holders must confirm (amongst other things): (A) its Settlement Instructions; and (B) that it may legally and lawfully be issued with the Non-Cash Scheme Consideration.

 

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Information on the steps Scheme Creditors are required to take in completing the Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Deed are set out in Part 7 (Scheme Consideration Elections) and in the Ordinary Solicitation Packet.

Actions to be taken in relation to the Schemes

 

  (c) Each CN Holder that wishes to vote at the Ordinary Meetings will be required to ensure that its CN Account Holder instructs the relevant Clearing System in which the CNs which are the subject of the CN Account Holder Letter and Ballot are held to block those CNs. This can be effected by giving Custody Instructions to that effect to the relevant Clearing System prior to the Custody Instruction Deadline, being 11:00am, 14 October 2014.

 

  (d) If you are a CN Holder that is not an Account Holder and wish to vote at the Ordinary Meetings, you should direct your CN Account Holder to complete the appropriate parts of the CN Account Holder Letter set out in Schedule 1 of Part A to the Ordinary Solicitation Packet and deliver the completed CN Account Holder Letter as soon as possible to the Information Agent and, in any event, so as to be received by the Voting Instruction Deadline, being 11:00 a.m. (Cayman Islands time) on 15 October 2014.

 

  (e) If you are a Senior Note Scheme Creditor that is an Account Holder and wish to vote at the Ordinary Meetings, you should complete the appropriate parts of the CN Account Holder Letter set out in Schedule 1 of Part A of the Ordinary Solicitation Packet and deliver the completed CN Account Holder Letter as soon as possible to the Information Agent and, in any event, so as to be received by the Voting Instruction Deadline, being 11:00 a.m. (Cayman Islands time) on 15 October 2014.

 

  (f) Failure to deliver a valid CN Account Holder Letter on behalf of a CN Holder by the Voting Instruction Deadline will mean that the relevant CN Holder will, subject to the Chairperson’s discretion, not be entitled to vote at the Ordinary Meetings. A CN Account Holder may complete and submit a CN Account Holder Letter on behalf of a relevant CN Holder if the CN Account Holder has authority to do so.

 

  (g) The amount of the Scheme Claims of each CN Holder which submits a valid CN Account Holder Letter in respect of the CNs will be calculated for voting purposes as at the Record Time based on information confidentially provided to LDK Solar. This information will be used by the Chairperson to determine whether each resolution is passed at the Ordinary Meetings.

 

  (h) Completed CN Account Holder Letters should be delivered to the Information Agent. A CN Account Holder Letter should not in any circumstances be delivered to the CN Trustee, the JPLs or any of the Scheme Companies. Neither the CN Trustee, the Information Agent, LDK Solar nor any member of the Group and any of their respective Subsidiaries, officers, directors or employees or any other person will be under any duty to give notification of any defects, irregularities or delays in any CN Account Holder Letter, nor will any of such entities or persons incur any liability for failure to give such notification.

 

  (i) A CN Holder on whose behalf a duly completed CN Account Holder Letter is lodged prior to the Voting Instruction Deadline may still attend the Ordinary Meetings and vote for or against the Schemes.

 

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Completed CN Account Holder Letters should be delivered to the Information Agent as soon as possible in accordance with the Communications Policy and in any event before the Voting Instruction Deadline being 11:00 a.m. (Cayman Islands time) on 15 October 2014.

If you are in any doubt as to what action you should take in connection with this Explanatory Statement, the proposals contained in it or the documents that accompany it, you are recommended to seek your own independent advice immediately from your legal, financial, tax or other independent adviser.

Ordinary Scheme Creditors that are not CN Holders

Ordinary Scheme Creditors that are not CN Holders should read the full instructions set out in Part B to the Ordinary Solicitation Packet.

 

  (j) You should read this Explanatory Statement as a whole, in conjunction with Part B of the Ordinary Solicitation Packet. Part B to the Ordinary Solicitation Packet includes:

 

  (i) General guidance and instructions for Ordinary Scheme Creditors (that are not CN Holders) for voting at the Ordinary Meetings.

 

  (ii) The Ordinary Proxy Form which contains the voting form relating to the Ordinary Meetings.

 

  (iii) The Capitalisation Request Form, being the form Ordinary Scheme Creditors complete in order to elect the Cash Option and/ or the Non-Cash Option.

 

  (iv) The Designated Recipient Form, being the form CN Holders complete in order to appoint a Designated Recipient.

 

  (v) The Distribution Confirmation Deed, being a Deed whereby CN Holders must confirm (amongst other things): (A) its Settlement Instructions; and (B) that it may legally and lawfully be issued with the Non-Cash Scheme Consideration.

Information on the steps Scheme Creditors are required to take in completing the Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Deed are set out in Part 7 (Scheme Consideration Elections) and in the Ordinary Solicitation Packet.

 

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Actions to be taken in relation to the Schemes

 

  (k) Any Ordinary Scheme Creditor may appoint a proxy to attend to vote on its behalf at the Ordinary Meetings, comprising:

 

  (i) The LDK Solar CI Ordinary Meeting; and

 

  (ii) The LDK Solar HK Ordinary Meeting.

 

  (l) Unless an Ordinary Scheme Creditor is an individual, it must complete and return the Ordinary Proxy Form in order to be able to vote at the Ordinary Meetings. A proxy must be an individual person and may be a director or officer of the relevant Ordinary Scheme Creditor (if a corporation), or may be some other individual person (including the Scheme Supervisors), whether an Ordinary Scheme Creditor or not.

 

  (m) If you are an Ordinary Scheme Creditor and wish to vote at the Ordinary Meetings, you should complete the Ordinary Proxy Form and elect whether to:

 

  (i) attend and vote at the Ordinary Meetings in person, or appoint someone else as your proxy to attend and vote at the Ordinary Meetings in person on your behalf (in which case, you can also specify whether you wish your proxy to vote at its discretion or to vote in accordance with your instructions); or

 

  (ii) instruct the Chairperson as your proxy to cast your vote in accordance with your instructions.

 

  (n) You should return the completed Ordinary Proxy Form as soon as possible to the JPLs in accordance with the Communications Policy, and in any event, so as to not be received by the Voting Instruction Deadline.

 

  (o) The Cayman Scheme requires the approval of a majority in number representing at least 75% in value of the Ordinary Scheme Creditors present and voting (in person, by a duly authorised representative, if a corporation, or by proxy) at the LDK Solar CI Ordinary Meeting to be held on 16 October 2014 at 8:30p.m. (Cayman Islands time)/ 17 October 2014 at 9:30am (Hong Kong time).

 

  (p) Similarly, the Hong Kong Scheme also requires the approval of a majority in number representing at least 75% in value of the Ordinary Scheme Creditors present and voting (in person, by a duly authorised representative, if a corporation, or by proxy) at the LDK Solar HK Ordinary Meeting to be held on 16 October 2014 at 8:40p.m. (Cayman Islands time)/ 17 October 2014 at 9:40am (Hong Kong time).

 

  (q) It is important that as many votes as possible are cast at the Ordinary Meetings so that the Grand Court and the High Court be satisfied that there is a fair and reasonable representation of the Ordinary Scheme Creditors. You are therefore strongly urged to sign and return your Ordinary Proxy Form and CN Account Holder Letter (as applicable) as soon as possible in accordance with the voting instructions in this Explanatory Statement.

 

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If you are in any doubt as to what action you should take in connection with this Explanatory Statement, the proposals contained in it or the documents that accompany it, you are recommended to seek your own independent advice immediately from your legal, financial, tax or other independent advisers.

 

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PART 7

 

12. SCHEME CONSIDERATION ELECTIONS

 

12.1 Capitalisation Request Form

 

  (a) As set out in Parts 4 (Senior Note Scheme Creditors), 5 (Preferred Obligation Scheme Creditors) and 6 (Ordinary Scheme Creditors) of this Explanatory Statement:

 

  (i) the Account Holder Letters and Ballots to be completed by Senior Note Scheme Creditors;

 

  (ii) the Preferred Proxy Form to be completed by the Preferred Obligation Scheme Creditors; and

 

  (iii) the Ordinary Proxy Form to be completed by the Ordinary Scheme Creditors,

each enclose a Capitalisation Request Form, the Designated Recipient Form and the Distribution Confirmation Deed.

 

  (b) Scheme Creditors will be required to complete the Capitalisation Request Form in order to make an election to receive the Cash Out Amount or the Non-Cash Scheme Consideration. Further instructions for Scheme Creditors on how to complete the Capitalisation Request Form are set out in the Senior Solicitation Packet (for Senior Note Scheme Creditors), the Preferred Solicitation Packet (for Preferred Obligation Scheme Creditors) and the Ordinary Solicitation Packet (for Ordinary Scheme Creditors).

 

  (c) Each Scheme Creditor must return a duly completed Capitalisation Request Form and Distribution Confirmation Deed to:

 

  (i) In the case of Senior Note Scheme Creditors and CN Holders, to the Information Agent using the contact details specified in the Communications Policy;

 

  (ii) In the case of the Preferred Obligation Scheme Creditors, to the JPLs using the contact details specified in the Communications Policy; and

 

  (iii) In the case of Admitted Ordinary Scheme Creditors (but excluding the CN Holders), to the JPLs using the contact details specified in the Communications Policy.

 

  (d) Under the Schemes and the Chapter 11 Plan, LDK Solar will not issue (i) the Cash Out Amount to any Scheme Creditor that has elected the Cash Out Option; and/ or (ii) the Non-Cash Scheme Consideration to any Scheme Creditor who has elected, or is deemed to have elected, the Non-Cash Option, unless that Scheme Creditor has duly completed and returned the Distribution Confirmation Deed. Further information on the Distribution Confirmation Deed is set out in paragraph 12.3 of this Part 7 (Scheme Consideration Elections).

 

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  (e) Scheme Creditors shall also be entitled to appoint a Designated Recipient by duly completing the Appointment of Designated Recipient attached to the Capitalisation Request Form. A Designated Recipient is an entity that is designated as such by a Scheme Creditor as the recipient of any or all Non-Cash Scheme Consideration otherwise to be issued to such Scheme Creditor. Further information on appointing a Designated Recipient is set out in paragraph 12.2 of this Part 7 (Scheme Consideration Elections).

 

  (f) Scheme Creditors are recommended to make an election in the election box to the Capitalisation Request Form even if it intends to vote against the Schemes and the Chapter 11 Plan, in case a resolution to approve the Schemes is passed at the respective Scheme Class Meetings by the required majority and is sanctioned by the Grand Court and the High Court.

If you are unclear about, or have any questions concerning, the action you are required to take, please contact:

 

  (g) If you are a Senior Note Scheme Creditor or a CN Holder, the Information Agent using the contact details set out in Section 5 (Communications Policy) hereof;

 

  (h) If you are a Preferred Obligation Scheme Creditor or an Ordinary Scheme Creditor (but excluding CN Holders), the JPLs using the contact details set out in Section 5 (Communications Policy) hereof.

The Information Agent and the JPLs cannot provide Scheme Creditors with legal advice in relation to the Schemes or related matters. Contacting the Information Agent or the JPLs should not be used as a substitute for, and the JPLs and the Directors urge each Scheme Creditor to consider seeking professional advice in relation to the Schemes.

Elections and deemed elections under the Capitalisation Request Form

 

  (i) Scheme Creditors will only be issued with the Scheme Consideration to the extent they have Qualifying Scheme Claims, being Senior Note Scheme Claims, the Preferred Obligation Scheme Claims and Admitted Ordinary Claims.

 

  (j) Each Scheme Creditor who does not submit a valid Capitalisation Request Form on or before the Voting Instruction Deadline shall be deemed to have elected to receive the applicable Cash Out Amount in respect of its Qualifying Scheme Claim.

 

  (k) If a Senior Note Scheme Creditor or a Preferred Obligation Scheme Creditor elects the Non-Cash Option, it shall be entitled to elect the Agreed Share Ratio, which shall be no lower 8.736% and no higher than 15% of the relevant Qualifying Scheme Claim.

 

  (l) If an Ordinary Scheme Creditor elects the Non-Cash Option to receive the Non-Cash Scheme Consideration, the Agreed Share Ratio shall be equal to 15% of the Admitted Ordinary Claim, notwithstanding any purported elections made by an Ordinary Scheme Creditor to elect the Agreed Share Ratio.

 

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  (m) If a Preferred Obligation Scheme Creditor and/ or Senior Note Scheme Creditor: (i) elects, or is deemed to have elected to receive the Cash Option; and (ii) there is a Cash Deficit, that Scheme Creditor shall be deemed to have elected to receive the Non-Cash Scheme Consideration in respect of:

 

  (i) in the case of a Preferred Obligation Scheme Creditor, its Deemed Preferred Non-Cash Claim;

 

  (ii) in the case of a Senior Note Scheme Creditor, its Deemed Senior Non-Cash Claim; and

 

  (iii) in the case of an Admitted Ordinary Scheme Creditor, its Adjusted Deemed Ordinary Non-Cash Claim, subject to paragraph 12.1(p) below.

 

  (n) Preferred Obligation Scheme Creditors and Senior Note Scheme Creditors will also be allowed to elect a Fall Back Agreed Share Ratio, which shall be no lower 8.736% and no higher than 15% of the relevant Qualifying Scheme Claim/ Senior Note Guarantee Claim, which will apply in the event that there is a Cash Deficit and such Scheme Creditor is deemed to have elected to receive the Non-Cash Scheme Consideration.

 

  (o) If (i) there is a Cash Deficit; and (ii) Senior Note Scheme Creditors and/or Preferred Obligation Scheme Creditors have not elected a Fall Back Agreed Share Ratio, these Preferred Obligation Scheme Creditors and Senior Note Scheme Creditors shall be deemed to have elected an Agreed Share Ratio of 15%.

 

  (p) Where in respect of an Ordinary Scheme Creditor who has elected or is deemed to have elected to receive Non-Cash Scheme Consideration, there is an Ordinary Non-Cash Deficit (but not an Ordinary Cash Deficit), that Ordinary Scheme Creditor shall be deemed to have elected to receive the Ordinary Cash Out Amount in respect of its Adjusted Deemed Ordinary Cash Claim.

 

  (q) In the event that there is both an Ordinary Cash Deficit and an Ordinary Non-Cash Deficit an Admitted Ordinary Scheme Creditor shall receive the Ordinary Cash Out Amount, in respect of its Adjusted Ordinary Cash Claim and the Ordinary Non-Cash Consideration in respect of its Adjusted Ordinary Non-Cash Claim.

 

12.2 Appointment of Designated Recipient

 

  (a) The Schemes and the Chapter 11 Plan permit Scheme Creditors to irrevocably and unconditionally nominate a Designated Recipient as the recipient of any or all of the Non-Cash Scheme Consideration otherwise to be issued to such Scheme Creditor, subject to limitations in accordance with applicable securities laws and provided that (i) the Designated Recipient shall only be validly designated if it has submitted all Distribution Confirmation Deeds, Settlement Instructions and/or any other applicable forms that its designating Scheme Creditor is required to submit pursuant to the Schemes; and (ii) a Scheme Creditor may designate only one such entity and if such entity is a nominee holder it may only hold on behalf of one beneficial holder.

 

  (b) The form to appoint a Designated Recipient is attached to the Capitalisation Request Form, which is included in each of the Senior Solicitation Packet, the Preferred Solicitation Packet and the Ordinary Solicitation Packet.

 

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12.3 Distribution Confirmation Deed

 

  (a) As set out in paragraph 12.1, Scheme Creditors electing to receive the Cash Out Amount or any Non-Cash Scheme Consideration must submit a validly completed Capitalisation Request Form, along with a validly completed Distribution Confirmation Deed to be delivered to the appropriate contacts as set out in the Communications Policy, by the Voting Instruction Deadline. Pursuant to the Distribution Confirmation Deed, Scheme Creditors confirm (amongst other things) that they may legally and lawfully be issued the Non-Cash Scheme Consideration.

 

  (b) If a Capitalisation Request Form and Distribution Confirmation Deed is not submitted by the Voting Instruction Deadline, Scheme Creditors will only be entitled to receive its entitlement to the Scheme Consideration if it submits a Distribution Confirmation Deed. The Distribution Confirmation Deed is included in each of the Senior Solicitation Packet, the Preferred Solicitation Packet and the Ordinary Solicitation Packet.

 

  (c) For the avoidance of doubt, Scheme Creditors do not have to complete a Distribution Confirmation Deed in order to vote on the Schemes and the Chapter 11 Plan.

 

12.4 Trust Distribution Deed

 

  (a) If a Qualifying Scheme Creditor is not able to be issued with Non-Cash Scheme Consideration for any of the reasons described in paragraph 7.16(ff) above, its entitlement to Non-Cash Scheme Consideration will be issued to the Non-Cash Scheme Consideration Trustee, on trust for the relevant Qualifying Scheme Creditor for the Holding Period.

 

  (b) In such circumstance, the Non-Cash Scheme Consideration Trustee is authorised to sell such Non-Cash Scheme Consideration to a third party on arm’s length terms and the net cash proceeds of such sale (after deduction of costs and expenses of the Non-Cash Scheme Consideration Trustee in respect of such sale) shall be paid to the relevant Qualifying Scheme Creditor subject to receipt of a validly completed Trust Distribution Deed, a copy of which is set out at Appendix 33 (Trust Distribution Deed) to this Explanatory Statement.

 

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12.5 Lock Up Deed

 

  (a) Pursuant to the Schemes, each Scheme Creditor authorises LDK Solar to execute a deed on its behalf whereby each of the Scheme Creditors severally undertakes to LDK Solar that it will not from the Issue Date until the Termination Date in respect of its entire holding of Scheme Shares, directly or indirectly transfer, sell, mortgage, charge, assign, grant options over or otherwise dispose of (or agree to transfer, sell, mortgage, charge, assign, grant options over or otherwise dispose of) the legal or beneficial ownership (or both) in or rights arising from such shares or interests in shares, except where required to do so by applicable law or regulation. In such Deed the “Termination Date” shall occur (i) two months after the Issue Date for the Scheme Shares derived from 8.736% of that Scheme Creditor’s Non-Cash Entitlement, and (iii) 31 December 2014 (or if earlier, 2 months from the Issue Date) for the Scheme Shares derived from the Relevant Percentage of its Non-Cash Entitlement; and the “Relevant Percentage” shall mean a percentage, if any, equal to that Scheme Creditors Agreed Share Ratio less 8.736%.

 

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PART 8

 

13. TRANSACTION OVERVIEW

This section contains a brief description of the principal commercial terms of the Restructuring Proposal. The summary information contained in this section does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by references to, the more detailed information contained in the Schemes and this Explanatory Statement.

In summary, the Schemes and the Restructuring Proposal provide that the treatment of the Senior Note Scheme Creditors, the Preferred Obligation Scheme Creditors and the Ordinary Scheme Creditors are similar, save for as set out below.

 

13.1 The commercial terms of the Restructuring Proposal for Senior Note Scheme Creditors

 

  (a) Under the terms of the Restructuring Proposals, the Schemes and the Chapter 11 Plan, each Senior Note Scheme Creditor:

 

  (i) To the extent that the Senior Note Scheme Creditor has elected or is deemed to have elected to receive the Senior Note Cash Out Amount, each Senior Note Scheme Creditor shall be entitled to receive:

 

  (A) If there is no Senior Cash Deficit6, an amount equal to US$0.10 per US$1.00 of that Senior Note Scheme Creditor’s Adjusted Senior Cash Claim. The Adjusted Senior Cash Claim is the amount in Dollars equal to the variable m in the formula:

m = b / n * l

where:

b is equal to the Maximum Senior Note Cash Claims;

n is equal to the aggregate amount of Senior Note Cash Claims; and

l is equal to that Senior Note Scheme Creditor’s Senior Note Cash Claim;

provided that m shall not be greater than l; or

 

  (B) If there is a Senior Cash Deficit, an amount equal to that Senior Note Scheme Creditor’s Adjusted Senior Cash Claim as set out above plus its Senior Non-Cash Entitlement, being a US Dollar amount equal to the amount of a Senior Note Scheme Creditor’s Deemed Senior Non-Cash Claim7.

 

6  A Senior Cash Deficit will occur if the Maximum Senior Note Cash Claims is less than the aggregate amount of Senior Note Cash Claims
7  A Deemed Senior Non-Cash Claim is the amount of its Senior Note Cash Claim less its Adjusted Senior Cash Claim;

 

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  (ii) To the extent that a Senior Note Scheme Creditor has elected the Senior Note Non-Cash Scheme Consideration, or is deemed to have elected to receive the Deemed Senior Non-Cash Claim as set out above each Senior Note Scheme Creditor shall be entitled to receive:

 

  (A) the Scheme Shares, being ADSs at one ADS per 1.586 of Scheme Share Entitlement Amount in the Agreed Share Ratio. The Agreed Share Ratio is the percentage of the Senior Note Non-Cash Entitlement elected or deemed to have been elected by the relevant Senior Note Scheme Creditor in its Capitalisation Request Form to be converted into Scheme Shares, being no lower than 8.736% and no higher than 15%; and

 

  (B) the 2018 Convertible Bonds in the Agreed Convertible Bond Ratio (100% minus the relevant Agreed Share Ratio), at US$100 in principal amount per each US$100 of Convertible Bond Entitlement Amount. A summary of the terms of the 2018 Convertible Bonds is set out in paragraph 13.6 of this Part 9 (Overview of the Group).

 

  (b) Under the Schemes, LDK Solar will not be obliged to make available any funds to pay the Senior Note Cash Out Amount, and is only likely to do so if the JPLs are confident that there is sufficient finance available to pay both a Senior Note Cash Out Amount and a Preferred Obligation Cash Out Amount, in addition to the Ordinary Cash Amount, and that it is appropriate in the circumstances to do so. Failure to provide the Senior Note Cash Out Amount will not constitute any breach of the Schemes or the Restructuring Documents.

 

  (c) As at the date of this Explanatory Statement, no additional funding has been secured by LDK Solar to finance the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount. The JPLs will not be taking any active steps to secure further funding for Cash Out Amount, and as matters stand there is unlikely to be any cash available to fund the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount.

 

  (d) To the extent that LDK Solar does not provide the Senior Note Cash-Out Amount, those Senior Note Scheme Creditors who elected to receive it will be deemed to have elected to receive the Non-Cash Scheme Consideration as described above. In this scenario, Senior Note Scheme Creditors who have not specified a Fall Back Agreed Share Ratio will be deemed to have elected the Scheme Shares at the Agreed Share Ratio of 8.736% with the remainder of the Senior Note Scheme Claim to be satisfied through the issuance of the 2018 Convertible Bonds.

 

  (e) Senior Note Scheme Creditors can refer to the Scheme Consideration for Senior Note Scheme Claims flowchart attached at Appendix 40 (Unaudited Management Accounts to 31 December 2013) of this Explanatory Statement as a diagram representation of the election and deemed election process.

 

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Illustrative examples of the treatment of Senior Note Scheme Claims

Set out in the table below are four hypothetical scenarios illustrating the treatment of a Senior Note Scheme Claim worth US$1,000,000. Please note that at the date of this Explanatory Statement, there is not sufficient cash available to provide a Cash Out Option to Senior Note Scheme Creditors as envisaged by Scenarios 3 and 4.

ILLUSTRATIVE TREATMENT OF SENIOR NOTE SCHEME CLAIMS

 

     Scenario 1     Scenario 2     Scenario 3     Scenario 4  

Illustrative Holding (US$)

   $ 1,000,000      $ 1,000,000      $ 1,000,000      $ 1,000,000   

Cash Option

        

Claim Elected for Cash-Out

     NA        NA      $ 1,000,000      $ 500,000   

Treatment (% Cash Received per US$1.00 of Claim)

     NA        NA        10.0     10.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Payment to be Distributed

     NA        NA      $ 100,000      $ 50,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Remaining Claim

   $ 1,000,000      $ 1,000,000      $ 0.0      $ 500,000   

Non-Cash Option

        

Scheme Shares

        

Remaining Claim after Cash-Out

   $ 1,000,000      $ 1,000,000      $ 0.0      $ 500,000   

% of Remaining Claim Elected for Equity Distribution

     15.0     8.736     NA        15.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Claims Elected for Equity Distribution

   $ 150,000      $ 87,360      $ 0.0      $ 75,000   

Share Price

     1.586        1.586        1.586        1.586   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares to be Distributed

     94,578        55,082        0.0        47,289   

2018 Convertible Bonds

        

Remaining Claim after Cash-Out

   $ 1,000,000      $ 1,000,000      $ 0.0      $ 500,000   

% of Remaining Claim Elected for New Convertible Bonds

     85.0     91.3     NA        85.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Claims Elected for 2018 Convertible Bonds

   $ 850,000      $ 912,640      $ 0.0      $ 425,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Principal Amount of 2018 Convertible Bonds to be issued

   $ 850,000      $ 912,600        0.0      $ 425,000   

Scenario 1

 

  (f) Scenario 1 deals with a scenario where a Senior Note Scheme Creditor with a Senior Note Scheme Claim of US$1,000,000 has elected the Senior Non-Cash Option in respect of its entire claim in the Capitalisation Request Form and chosen an Agreed Share Ratio of 15%. In this scenario 1, the Senior Note Scheme Creditor will receive:

 

  (i) 94,578 Scheme Shares or US$150,000 of its Senior Non-Cash Entitlement in Scheme Shares; and

 

  (ii) 2018 Convertible Bonds with a principal amount of US$850,000;

in full and final satisfaction of its Claims

 

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Scenario 2

 

  (g) Scenario 2 deals with the scenario where a Senior Note Scheme Creditor with a Senior Note Scheme Claim of US$1,000,000 has elected or is deemed to have elected an Agreed Share Ratio of 8.736%. In this scenario 2, the Senior Note Scheme Creditor will receive:

 

  (i) 55,082 Scheme Shares or US$87,360 of its Senior Non-Cash Entitlement in Scheme Shares; and

 

  (ii) 2018 Convertible Bonds with a principal amount of US$912,600;

 

  (iii) in full and final satisfaction of its Claims.

Scenario 3

 

  (h) Scenario 3 deals with a scenario where a Senior Note Scheme Creditor with a Senior Note Scheme Claim of US$1,000,000 has elected the Cash Option in its Capitalisation Request Form to receive the Senior Note Cash Out Amount of US$0.10 per US$1.00 of that Senior Note Scheme Creditor’s Senior Note Cash Claims. This scenario assumes that the Senior Note Cash Out Amount is available and not oversubscribed such that there is no Senior Cash Deficit. In this scenario, the Senior Note Scheme Creditor would receive US$100,000 in full and final satisfaction of its Claims. Please note that at the date of this Explanatory Statement, there is not sufficient cash available to provide a Cash Option to Senior Note Scheme Creditors as envisaged by Scenario 3.

Scenario 4

 

  (i) Scenario 4 deals with a scenario where a Senior Note Scheme Creditor with a Senior Note Scheme Claim of US$1,000,000 has elected the Cash Option in its Capitalisation Request Form to receive the Senior Note Cash Out Amount. In this scenario, the Senior Note Cash Out Amount is available but oversubscribed such that there is a Senior Cash Deficit, with the Senior Note Scheme Creditor only entitled to receive US$50,000 of its Senior Note Cash Claim. This scenario assumes that the Senior Note Scheme Creditor has made specified a Fall Back Agreed Share Ratio in its Capitalisation Request Form of 15%. In this scenario 4, the Senior Note Scheme Creditor would receive:

 

  (i) US$50,000, representing the Senior Note Cash Out Amount for that Senior Note Scheme Creditor;

 

  (ii) 47,289 Scheme Shares or US75,000 of its Senior Non-Cash Entitlement in Scheme Shares; and

 

  (iii) 2018 Convertible Bonds with a principal amount of US$425,000;

in full and final satisfaction of its Claims.

Please note that at the date of this Explanatory Statement, there is not sufficient cash available to provide a Cash Option to Senior Note Scheme Creditors as envisaged by Scenario 4.

 

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13.2 The commercial terms of the Restructuring Proposal for Ordinary Scheme Creditors

 

  (a) Under the Schemes and the Restructuring Proposals, each Ordinary Scheme Creditor’s Claims are to be released and compromised in return for an entitlement to the Ordinary Cash Out Amount and/or the Ordinary Non-Cash Scheme Consideration. Although an Ordinary Scheme Creditor may elect the Cash Option or Non-Cash Option, the amount of cash available to be distributed is limited, as is the total amount of Ordinary Non-Cash Scheme Consideration. The Schemes therefore contain adjustment mechanisms to reduce the amount of an Admitted Ordinary Scheme Creditors entitlement to receive the Ordinary Cash Out Amount in the event of an Ordinary Cash Deficit8 (the result being its Adjusted Ordinary Cash Claim) and to reduce its entitlement to Ordinary Non-Cash Scheme Consideration in the event of an Ordinary Non-Cash Deficit9 (the result being its Adjusted Ordinary Non-Cash Claim).

 

  (b) Where there is an Ordinary Cash Deficit but no Ordinary Non-Cash Deficit, an Admitted Ordinary Scheme Creditor who elected the Cash Option will be entitled to an amount of Ordinary Non-Cash Consideration to top-up its entitlement (being its Deemed Ordinary Non-Cash Claim). However, the amount of Available Top-up Non-Cash Consideration may itself be restricted by the limited total amount of Ordinary Non-Cash Scheme Consideration. In such circumstances the Deemed Ordinary Non-Cash Claim will also be adjusted downwards (the result being its Adjusted Deemed Ordinary Non-Cash Claim).

 

  (c) Similarly, where there is an Ordinary Non-Cash Deficit but no Ordinary Cash Deficit, an Admitted Ordinary Scheme Creditor who elected the Non-Cash Option will be entitled to an amount of Cash-Out Amount to top-up its entitlement (being its Deemed Ordinary Cash Claim). However, the amount of Available Top-up Cash Consideration may itself be restricted by the limited total amount of Ordinary Non-Cash Scheme Consideration. In such circumstances, that creditor’s Deemed Ordinary Cash Claim will also be adjusted downwards (the result being its Adjusted Deemed Ordinary Cash Claim).

 

  (d) If there is both an Ordinary Cash Deficit and an Ordinary Non-Cash Deficit, an Admitted Ordinary Scheme Creditor will not be entitled to have its entitlement topped up with any Adjusted Deemed Ordinary Cash Claim or Adjusted Deemed Ordinary Non-Cash Claim.

 

8  An Ordinary Cash Deficit will occur if the Available Top-up Cash Consideration is zero, i.e. where the aggregate amount of Ordinary Cash Claims equal or exceed the Maximum Ordinary Cash Claims. This would occur, for example, if there is not sufficient cash available to pay a Cash Out Amount of 5 cents in the Dollar on all Ordinary Cash Claims.
9  An Ordinary Non-Cash Deficit will occur if the Available Top-up Non-Cash Consideration is zero, i.e. where the aggregate amount of Ordinary Non-Cash Claims equal or exceed $18,800,000.

 

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  (e) An Admitted Ordinary Scheme Creditor will therefore be entitled to receive:

 

  (i) the Ordinary Cash Out Amount, which is an amount in Dollars equal to the product of that creditor’s Ordinary Cash Amount10 and 0.05;

 

  (ii) an allotment of Scheme Shares at the rate of one Scheme Share per US$1.586 of that Admitted Ordinary Scheme Creditor’s Scheme Share Entitlement Amount; and

 

  (iii) 2018 Convertible Bonds at the rate of US$100 in principal amount per each US$100 of that Admitted Ordinary Scheme Creditor’s Convertible Bond Entitlement Amount11.

 

  (f) The Agreed Share Ratio for an Ordinary Scheme Creditor is fixed at 15%. An Admitted Ordinary Scheme Creditor will therefore have a Scheme Share Entitlement Amount equal to 15% of its Ordinary Non-Cash Entitlement, and a Convertible Bond Entitlement Amount equal to 85% of its Ordinary Non-Cash Entitlement.

 

  (g) An Admitted Ordinary Scheme Creditor’s Ordinary Non-Cash Entitlement is the sum of its Adjusted Ordinary Non-Cash Claim and, if there is an Ordinary Cash Deficit but no Ordinary Non-Cash Deficit, its Adjusted Deemed Ordinary Non-Cash Claim.

 

  (h) Under the Schemes, LDK Solar will be obliged to provide a Cash Option to Ordinary Scheme Creditors. However, the amount to which an Admitted Ordinary Scheme Creditor is entitled will be subject to the adjustments outlined above.

 

  (i) Admitted Ordinary Scheme Creditors can refer to the Scheme Consideration for Ordinary Claims flowchart attached at Appendix 36 (Scheme consideration for Ordinary Claims) as a diagram representation of the election and deemed election process.

 

10  The Ordinary Cash Amount is the sum of its Adjusted Ordinary Cash Claim and, if there is an Ordinary Non-Cash Deficit but no Ordinary Cash Deficit its Adjusted Deemed Ordinary Cash Claim;
11  Subject to being rounded downwards to the nearest US$100, or to zero if less than US$100.

 

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Illustrative examples of the treatment of Admitted Ordinary Claims

Set out in the table below are four hypothetical scenarios concerning the treatment of an Admitted Ordinary Claim worth US$1,000,000.

ILLUSTRATIVE TREATMENT OF ADMITTED ORDINARY CLAIMS

 

     Scenario 5     Scenario 6     Scenario 7  

Illustrative Holding (US$)

   $ 1,000,000      $ 1,000,000      $ 1,000,000   

Cash Option

      

Claim Elected for Cash-Out

   $ 1,000,000        NA      $ 200,000   

Treatment (% Cash Received per US$1.00 of Claim)

     5.0     NA        5.0
  

 

 

   

 

 

   

 

 

 

Cash Payment to be Distributed

   $ 50,000        NA      $ 10,000   
  

 

 

   

 

 

   

 

 

 

Remaining Claim

   $ 0.0      $ 1,000,000      $ 800,000   

Non-Cash Option

      

Scheme Shares

      

Remaining Claim after Cash-Out

   $ 0.0      $ 1,000,000      $ 800,000   

% of Remaining Claim Elected for Equity Distribution

     NA        15.000     15.0
  

 

 

   

 

 

   

 

 

 

Claims Elected for Equity Distribution

   $ 0.0      $ 150,000      $ 120,000   

Share Price

     1.586        1.586        1.586   
  

 

 

   

 

 

   

 

 

 

Shares to be Distributed

     0.0        94,578        75,662   

2018 Convertible Bonds

      

Remaining Claim after Cash-Out

   $ 0.0      $ 1,000,000      $ 800,000   

% of Remaining Claim Elected for New Convertible Bonds

     NA        85.0     85.0
  

 

 

   

 

 

   

 

 

 

Claims Elected for 2018 Convertible Bonds

   $ 0.0      $ 850,000      $ 680,000   
  

 

 

   

 

 

   

 

 

 

Principal Amount of 2018 Convertible Bonds to be issued

     0.0        850,000        680,000   

Scenario 5

 

  (j) In Scenario five an Ordinary Scheme Creditor with an Admitted Ordinary Claim of US$1,000,000 has elected the Cash Option in the Capitalisation Request Form to receive the Ordinary Cash Out Amount of US$0.05 per US$1.00 of that Ordinary Scheme Creditor’s Ordinary Cash Claim. This scenario assumes that the Ordinary Cash Out Amount is not oversubscribed such that there is no Ordinary Cash Deficit. In this scenario, the Admitted Ordinary Scheme Creditor will receive US$50,000 in full and final satisfaction of its Claims.

Scenario 6

 

  (k) In Scenario six an Ordinary Scheme Creditor with an Admitted Ordinary Claim of US$1,000,000 has elected the Ordinary Non-Cash Option in the Capitalisation Request Form to receive 15% of its Admitted Ordinary Claim in Scheme Shares. Scenario 6 assumes that the amount of Non-Cash Ordinary Scheme Consideration is not oversubscribed, and that there is therefore no Ordinary Non-Cash Deficit. In this scenario 6, the Admitted Ordinary Scheme Creditor will receive:

 

  (i) 94,578 Scheme Shares or US$150,000 of its Admitted Ordinary Claim in Scheme Shares; and

 

  (ii) 2018 Convertible Bonds with a principal amount of US$850,000;

in full and final satisfaction of its Claims.

 

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Scenario 7

 

  (l) In Scenario 7 an Admitted Ordinary Scheme Creditor with an Admitted Ordinary Claim of US$1,000,000 has elected the Cash Option in its Capitalisation Request Form in order to receive the Ordinary Cash Out Amount. In this scenario, the Ordinary Cash Out Amount is oversubscribed such that there is an Ordinary Cash Deficit. The adjustment mechanism described above applies so as to reduce the Ordinary Cash Amount to US$200,000 which is multiplied by 0.05 to arrive at the Ordinary Cash Out Amount. The scenario also assumes that there is no Ordinary Non-Cash Deficit, so that the Admitted Ordinary Scheme Creditor also receives Ordinary Non-Cash Scheme Consideration based on its Adjusted Deemed Ordinary Non-Cash Claim. In this scenario 7, the Admitted Ordinary Scheme Creditor will therefore receive:

 

  (i) US$10,000, being the Ordinary Cash Out Amount for that Admitted Ordinary Scheme Creditor;

 

  (ii) 75,662 Scheme Shares or US$120,000 of its Admitted Ordinary Claim in Scheme Shares; and

 

  (iii) 2018 Convertible Bonds with a principal amount of US$680,000;

in full and final satisfaction of its Claims.

 

13.3 The commercial terms of the Restructuring Proposal for Preferred Obligation Scheme Creditors

 

  (a) Under the terms of the Schemes and the Restructuring Proposals, each Preferred Obligation Scheme Creditor:

 

  (i) To the extent that Preferred Obligation Scheme Creditor has elected or is deemed to have elected to receive the Preferred Obligation Cash Out Amount, each Preferred Obligation Scheme Creditor shall be entitled to receive:

 

  (A) If there is no Preferred Cash Deficit12, an amount equal to US$0.10 per US$1.00 of that Preferred Obligation Scheme Creditor’s Adjusted Preferred Cash Claims. The Adjusted Preferred Cash Claim is the amount in Dollars equal to the variable u in the formula:

u = v / w * k

 

12  A Preferred Cash Deficit shall occur if the Maximum Preferred Cash Claims is less than the aggregate amount of Preferred Cash Claims.

 

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where:

v is equal to the Maximum Preferred Cash Claims;

w is equal to the aggregate amount of Preferred Cash Claims; and

k is equal to that Preferred Obligation Scheme Creditor’s Preferred Cash Claim;

provided that u shall not be greater than k.; or

 

  (B) If there is a Preferred Cash Deficit, an amount equal that Preferred Obligation Scheme Creditor’s Adjusted Preferred Cash Claim as set out above plus its Preferred Non-Cash Entitlement, being a US Dollar amount equal to the amount of a Preferred Obligation Scheme Creditor’s Deemed Preferred Non-Cash Claim13.

 

  (ii) To the extent that the Preferred Obligation Scheme Creditor has elected to receive the Preferred Obligation Non-Cash Scheme Consideration or is deemed to have elected to receive the Deemed Preferred Non-Cash Claim, each Preferred Obligation Scheme Creditor shall be entitled to receive:

 

  (A) The Scheme Shares, being ADSs at one ADS per 1.586 of Scheme Share Entitlement Amount in the Agreed Share Ratio. The Agreed Share Ratio is the percentage of the Preferred Non-Cash Entitlement elected or deemed to have been elected by the relevant Preferred Obligation Scheme Creditor in its Capitalisation Request Form to be converted into Scheme Shares being no lower than 8.736% and no higher than 15%; and

 

  (B) The Preferred Convertible Bonds in the Agreed Convertible Bond Ratio (100% minus the Agreed Share Ratio), at US$100 in principal amount per each US$100 of Convertible Bond Entitlement Amount. A summary of the terms of the Preferred Convertible Bonds to be offered to the Preferred Obligation Scheme Creditors is set out in paragraph 13.6 of this Part 9 (Overview of the Group) of this Explanatory Statement.

 

13  A Deemed Preferred Non-Cash Claim is the amount of its Preferred Obligation Cash Claim less its Adjusted Preferred Cash Claim;

 

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  (b) Under the Schemes, LDK Solar will not be obliged to make available any funds to pay the Preferred Obligation Cash Out Amount, and is only likely to do so if the JPLs are confident that there is sufficient finance available to pay both a Senior Note Cash Out Amount and a Preferred Obligation Cash Out amount, in addition to the Ordinary Creditor Cash Out Amount, and that it is appropriate in the circumstances to do so. Failure to provide the Preferred Obligation Cash Out amount will not constitute any breach of the Schemes or the Restructuring Documents.

 

  (c) As at the date of this Explanatory Statement, no additional funding has been secured by LDK Solar to finance the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount. The JPLs will not be taking any active steps to secure further funding for Cash Out Amount, and as matters stand there is unlikely to be any cash available to fund the Senior Note Cash Out Amount and the Preferred Obligation Cash Out Amount.

 

  (d) To the extent that LDK Solar does not provide the Preferred Obligation Cash-Out Amount, those Preferred Obligation Scheme Creditors who elected to receive it will be deemed to have elected to receive the Non-Cash Scheme Consideration as described above. In this scenario, Preferred Obligation Scheme Creditors who have not specified a Fall Back Agreed Share Ratio will be deemed to have elected the Scheme Shares at the Agreed Share Ratio of 8.736% with the remainder of the Preferred Obligation Scheme Claim to be satisfied through the issuance of the Preferred Convertible Bonds.

 

  (e) Preferred Obligation Scheme Creditors can refer to the Scheme Consideration for Preferred Obligation Scheme Claims flowchart attached at Appendix 42 (Unaudited Quarterly Accounts) to this Explanatory Statement as a diagram representation of the election and deemed election process.

Illustrative examples of the treatment of Preferred Obligation Scheme Claims

Set out in the table below are four hypothetical scenarios concerning the treatment of a Preferred Obligation Scheme Claim worth US$1,000,000. Please note that at the date of this Explanatory Statement, there is not sufficient cash available to provide a Cash Out Option to Preferred Obligation Scheme Creditors as envisaged by Scenarios 10 and 11.

ILLUSTRATIVE TREATMENT OF PREFERRED OBLIGATION SCHEME CLAIMS

 

     Scenario 8     Scenario 9     Scenario 10     Scenario 11  

Illustrative Holding (US$)

   $ 1,000,000      $ 1,000,000      $ 1,000,000      $ 1,000,000   

Cash Option

        

Claim Elected for Cash-Out

     NA        NA      $ 1,000,000      $ 500,000   

Treatment (% Cash Received per US$1.00 of Claim)

     NA        NA        10.0     10.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Payment to be Distributed

     NA        NA      $ 100,000      $ 50,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Remaining Claim

   $ 1,000,000      $ 1,000,000      $ 0.0      $ 500,000   

Non-Cash Option

        

Scheme Shares

        

Remaining Claim after Cash-Out

   $ 1,000,000      $ 1,000,000      $ 0.0      $ 500,000   

% of Remaining Claim Elected for Equity Distribution

     15.0     8.736     NA        15.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Claims Elected for Equity Distribution

   $ 150,000      $ 87,360      $ 0.0      $ 75,000   

Share Price

     1.586        1.586        1.586        1.586   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares to be Distributed

     94,578        55,082        0.0        47,289   

Preferred Convertible Bonds

        

Remaining Claim after Cash-Out

   $ 1,000,000      $ 1,000,000      $ 0.0      $ 500,000   

% of Remaining Claim Elected for New Convertible Bonds

     85.0     91.3     NA        85.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Claims Elected for New Convertible Bonds

   $ 850,000      $ 912,640      $ 0.0      $ 425,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Principal amount of Preferred Convertible Bonds

   $ 850,000      $ 912,600      $ 0.0      $ 425,000   

 

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Scenario 8

 

  (f) In Scenario 8 a Preferred Obligation Scheme Creditor with a Preferred Obligation Scheme Claim of US$1,000,000 has elected the Non-Cash Option in respect of its entire claim in the Capitalisation Request Form and chosen an Agreed Share Ratio of 15%. In this scenario 8, the Preferred Obligation Scheme Creditor will receive:

 

  (i) 94,578 Scheme Shares or US$150,000 of its Preferred Non-Cash Entitlement in Scheme Shares; and

 

  (ii) Preferred Convertible Bonds with a principal amount of US$850,000;

in full and final satisfaction of its Claims.

Scenario 9

 

  (g) In Scenario 9 a Preferred Obligation Scheme Creditor with a Preferred Obligation Scheme Claim of US$1,000,000 has elected an Agreed Share Ratio of 8.736%. In scenario 9, the Preferred Scheme Creditor will receive:

 

  (i) 55,082 Scheme Shares or US$87,360 of its Preferred Non-Cash Entitlement in Scheme Shares; and

 

  (ii) Preferred Convertible Bonds with a principal amount of US$912,600;

in full and final satisfaction of its Claims.

Scenario 10

 

  (h) In Scenario 10 a Preferred Obligation Scheme Creditor with a Preferred Obligation Scheme Claim of US$1,000,000 has elected the Cash Option in its Capitalisation Request Form to receive the Preferred Obligation Cash Out Amount of US$0.10 per US$1.00 of that Preferred Obligation Scheme Creditor’s Preferred Cash Claim. This scenario assumes that the Preferred Obligation Cash Out Amount is available and not oversubscribed such that there is no Preferred Cash Deficit. In this scenario, the Preferred Obligation Scheme Creditor will receive US$100,000 in full and final satisfaction of its Claims. Please note that at the date of this Explanatory Statement, there is not sufficient cash available to provide a Cash Option to Preferred Obligation Scheme Creditors as envisaged by Scenario 10.

 

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Scenario 11

 

  (i) In Scenario 11 a Preferred Obligation Scheme Creditor with a Preferred Obligation Scheme Claim of US$1,000,000 has elected the Cash Option in its Capitalisation Request Form in order to receive the Preferred Obligation Cash Out Amount. In this scenario, the Preferred Obligation Cash Out Amount is available but oversubscribed such that there is a Preferred Cash Deficit, with the Preferred Obligation Scheme Creditor only entitled to receive US$50,000 of its Preferred Cash Claim. This scenario assumes that the Preferred Obligation Scheme Creditor has specified a Fall Back Agreed Share Ratio in its Capitalisation Request Form of 15%. In this scenario 11, the Preferred Obligation Scheme Creditor would receive:

 

  (i) US$50,000, representing the Available Preferred Cash Amount for that Preferred Obligation Scheme Creditor;

 

  (ii) 47,289 Scheme Shares or US$75,000 of its Preferred Non-Cash Entitlement in Scheme Shares; and

 

  (iii) Preferred Convertible Bonds with a principal amount of US$425,000;

in full and final satisfaction of its Claims.

 

  (iv) Please note that at the date of this Explanatory Statement, there is not sufficient cash available to provide a Cash Option to Preferred Obligation Scheme Creditors as envisaged by Scenario 11.

FURTHER INFORMATION FOR SCHEME CREDITORS ON THE ELECTIONS TO BE MADE IN THE CAPITALISATION REQUEST FORM ON THE CASH-OUT AMOUNT AND NON-CASH SCHEME CONSIDERATION ARE SET OUT IN PART 7 (SCHEME CONSIDERATION ELECTIONS) OF THIS EXPLANATORY STATEMENT.

 

13.4 The releases to be granted under the Restructuring Proposal

 

  (a) As set out more fully in paragraph 7.16(ll) of Part 2 (Introduction to the Schemes) of this Explanatory Statement, in consideration of receiving their entitlement to the Scheme Consideration, each of the Scheme Creditors, along shall (amongst other things) release, forgive and forever discharge each of:

 

  (i) the Senior Note Guarantors, their Personnel and Affiliates;

 

  (ii) the Preferred Obligors, their Personnel and Affiliates;

 

  (iii) the Scheme Companies, their Personnel and Affiliates;

 

  (iv) the Released Advisers, their Personnel and Affiliates;

 

  (v) the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, in such capacities, and their Personnel and Affiliates,

 

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from any and all Claims and/or Liabilities arising prior to the Effective Date, except for certain carve-outs as described at paragraph 7.16(ll).

 

  (b) In addition, as described more fully in paragraph 7.16(ll) of Part 2 (Introduction to the Schemes) of this Explanatory Statement, each of the Scheme Companies, the Senior Note Guarantors and the Preferred Obligors shall (amongst other things) release, forgive and discharge unconditionally each of:

 

  (i) the Senior Note Scheme Creditors, their Personnel and Affiliates;

 

  (ii) the Preferred Obligation Scheme Creditors, their Personnel and Affiliates;

 

  (iii) the Senior Note Guarantors and their Personnel;

 

  (iv) the Preferred Obligors and their Personnel;

 

  (v) the Scheme Companies and their Personnel;

 

  (vi) the Released Advisers, their Personnel and Affiliates; and

 

  (vii) the Senior Note Trustee, the Registrar, the CN Trustee, the CN Registrar and the Common Depositary, in such capacities, and their Personnel and Affiliates;

from any and all Claims and/or Liabilities arising prior to the Effective Date or that are or may be based in whole or in part on any act, omission, transaction, event or other circumstance taking place or existing on or prior to the Effective Date, subject to the carve-outs as described at paragraph 7.16(ll).

 

13.5 The Scheme Shares

 

  (a) The Schemes allow Senior Note Scheme Creditors and Preferred Obligation Scheme Creditors to elect to receive between 8.736% and 15% of their Qualifying Scheme Claim in shares in LDK Solar valued at US$1.586 per share. This percentage is the Agreed Share Ratio. Admitted Ordinary Scheme Creditors that elect or are deemed to have elected to receive shares in LDK Solar cannot choose an Agreed Share Ratio, and will be deemed to have an Agreed Share Ratio of 15%. Qualifying Scheme Creditors will be entitled to elect to receive the Non-Cash Scheme Consideration by completing and returning the Capitalisation Request Form.

 

  (b) The remaining portion of a Scheme Creditor’s Scheme Consideration will:

 

  (i) in the case of the Senior Note Scheme Creditors and Admitted Ordinary Scheme Creditors, be satisfied through the issuance of the 2018 Convertible Bonds, being the new series of 5.535% convertible senior notes due 2018 to be issued by LDK Solar, the terms of which are summarised at paragraph 13.6 below; and

 

  (ii) in the case of the Preferred Obligation Scheme Creditors, be satisfied through the issuance of the Preferred Convertible Bonds, being the new series of 5.535% preferred notes due 2016 to be issued by LDK Solar, the terms of which are summarised at paragraph 13.6 below.

 

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13.6 The Convertible Bond Indentures

 

  (a) Where references are made to defined terms in this paragraph 13.6 that are not otherwise defined in this Explanatory Statement, these terms are defined in the 2018 Convertible Bond Indenture and the Preferred Convertible Bond Indenture.

 

  (b) The 2018 Convertible Bond Indenture and the Preferred Convertible Bond Indenture contain similar provisions, with the 2018 Convertible Bond Indenture to constitute the 2018 Convertible Bonds to be issued to Senior Note Scheme Creditors and Admitted Ordinary Scheme Creditors, and the Preferred Convertible Bond Indenture to constitute the Preferred Convertible Bonds, each to be issued by LDK Solar. Each Scheme Creditor should refer to the relevant Convertible Bond Indentures for the terms and conditions as they relate to the 2018 Convertible Bonds and the Preferred Convertible Bonds.

 

  (c) The 2018 Convertible Bonds will initially be represented by convertible bonds in global form to be issued on the Effective Date in fully registered form without interest coupons attached, and in minimum denominations of US$1,000 principal amount and integral multiples of US$100 in excess thereof. Such convertible bonds will be deposited with a Clearing System or its nominee and registered in the name of the Clearing System for the accounts of its participants. So long as any Clearing System or its nominee is the registered owner of the 2018 Convertible Bonds in global form, it shall be considered the registered holder of such convertible bonds.

 

  (d) The Preferred Convertible Bonds will initially be represented by convertible bonds in global form to be issued on the Effective Date in fully registered form without interest coupons attached, and in minimum denominations of US$1,000 principal amount and integral multiples of US$100 in excess thereof. Such convertible bonds will be deposited with a Clearing System or its nominee and registered in the name of the Clearing System for the accounts of its participants. So long as any Clearing System or its nominee is the registered owner of the Preferred Convertible Bonds in global form, it shall be considered the registered holder of such convertible bonds.

 

  (e) The 2018 Convertible Bonds will mature on 31 December 2018, subject to an earlier termination if (i) holders of the Preferred Convertible Bonds will not have been repaid in full at their Stated Maturity on June 3, 2016 and such holders have not elected to either extend such Stated Maturity beyond June 3, 2016 or receive Scheme Shares or ADSs in lieu thereof, or a combination of both. The Preferred Convertible Bonds will mature on 3 June 2016; provided that, at the option of the “Super Majority Holders” in writing to LDK Solar on or prior to such date, (i) such Stated Maturity is extended and/or (ii) any cash payments on such Stated Maturity is paid by LDK Solar with ADSs.

 

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  (f) In order to convert any 2018 Convertible Bonds or the Preferred Convertible Bonds (including any PIK amount already accredited as payment of any interest installment on any of them and payment of any interest instalment directly in ADSs), to the extent that no Restricted Securities are involved so that ADSs may be issued hereunder:

 

  (i) the Scheme Creditor must complete and manually sign an irreversible “Conversion Notice” in writing and deliver it to the 2018 Convertible Bond Trustee or the Preferred Convertible Bond Trustee (as applicable), and the Equity Settlement Agent of (A) a “Conversion Notice” in the case of the conversion of any Securities into ADSs or (B) an irrevocable notice in writing relating to the election by the relevant Holder to receive the interest instalment payment in ADSs, with a copy to LDK Solar and the ADS Depositary, LDK Solar shall issue or cause to be issued an unlegended certificate evidencing the relevant Ordinary Shares to the relevant Holder, each within five Business Days of the relevant Conversion Date or interest payment date, as the case may be;

 

  (ii) LDK Solar shall cause the Company Secretary, through the Equity Settlement Agent, to provide a copy of the Register of Members updated to evidence such issuance and registration in the name of the Holder as contemplated above;

 

  (iii) upon receipt by the Equity Settlement Agent of an irrevocable instruction in writing to the following effect from the holder addressed to LDK Solar, the Company Secretary and the Equity Settlement Agent, LDK Solar shall (A) cancel or cause to be cancelled the unlegended certificate described in paragraph (i) above, (B) re-issue in its stead an unlegended certificate evidencing the same amount of Ordinary Shares to the name of the ADS Depositary, and (C) deposit such unlegended certificate with the ADS Custodian (as contemplated in the Deposit Agreement) (the ADS Custodian) for the Depositary to issue the relevant ADSs pursuant to the Deposit Agreement;

 

  (iv) LDK Solar shall cause the Company Secretary, through the Equity Settlement Agent, to provide to the ADS Custodian a copy of the Register of Members updated to evidence such re-issuance and registration in the name of the ADS Depositary;

 

  (v) LDK Solar shall provide, through the Equity Settlement Agent, to the ADS Custodian with an officer’s certificate for the ADS Depositary in the typical form required pursuant to the Deposit Agreement; and

 

  (vi) upon receipt (A) by the ADS Custodian, through the Equity Settlement Agent, from the holder of a letter of transmittal, in the form as required by the Deposit Agreement and available on the ADS Custodian’s website, addressed to the ADS Depositary relating to the issuance of the relevant ADSs and (B) by the ADS Depositary of the payment of the relevant ADS issuance fees, LDK Solar shall cause the ADS Depositary to issue the relevant ADSs in book-entry form to the account of the holder as indicated in its letter of transmittal referred to above.

 

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  (g) Each Scheme Creditor making a request to LDK Solar in connection with a conversion of the Securities hereunder shall (A) have surrendered the relevant Securities for such conversion, (B) have certified in writing, among other things as may be required by the ADS Depositary, its status as an affiliate or non-affiliate, as the case may be, of LDK Solar within the meaning of Rule 144 and (C) have provided any other information or documentation required by the ADS Depositary or the ADS Custodian in connection with each deposit of the Ordinary Shares and issuance and delivery of the ADSs.

 

  (h) Each holder making a request to LDK Solar in connection with an interest instalment payment in ADSs shall (A) have certified in writing, among other things as may be required by the ADS Depositary, its status as an affiliate or non-affiliate, as the case may be, of LDK Solar within the meaning of Rule 144 and (B) have provided any other information or documentation required by the ADS Depositary or the ADS Custodian in connection with each deposit of the Ordinary Shares and issuance and delivery of the ADSs.

 

  (i) The conversion rate for the 2018 Convertible Bonds and Preferred Convertible Bonds will be as follows:

 

  (i) 50 Shares, whether represented by ADSs, if such conversion occurs on or before the earlier of 31 March 2015 or one year from the Effective Date;

 

  (ii) the number of Shares, whether represented by ADSs, into which US$1,000 of the principal amount of 2018 Convertible Bonds may be convertible at the VWAP of ADSs for the 20-trading-day period immediately prior to (but excluding) the date of the relevant conversion notice, if such conversion occurs during the first one-year period from April 1, 2015 to March 31, 2016 (both dates inclusive), with the conversion limited to (A) US$62.5 million of the 2018 Convertible Bonds during such one-year period and (B) US$20 million of the 2018 Convertible Bonds during any rolling quarter in such one-year period,

 

  (iii) the number of Shares, whether represented by ADSs, into which US$1,000 of the principal amount of Preferred Convertible Bonds may be convertible at the VWAP of ADSs for the 20-trading-day period immediately prior to (but excluding) the date of the relevant conversion notice, if such conversion occurs during the first one-year period from April 1, 2015 to March 31, 2016 (both dates inclusive), with the conversion limited to (A) US$62.5 million of the Preferred Convertible Bonds during such one-year period and (B) US$20 million of the Preferred Convertible Bonds during any rolling quarter in such one-year period, and

 

  (iv) the number of Shares, whether represented by ADSs, into which US$1,000 of the principal amount of the 2018 Convertible Bonds and the Preferred Convertible Bonds may be convertible at the VWAP of ADSs for the 20-trading-day period immediately prior to (but excluding) the date of the relevant conversion notice, if such conversion occurs at any time (A) on or after April 1, 2018, in case of the 2018 Convertible Bonds, and (B) on or after April 1, 2016, in case of the Preferred Convertible Bonds, each without any limitation on the amount of the conversion.

 

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  (j) If an event of default specified in any Convertible Bond Indenture occurs, the principal of, and any premium and accrued and unpaid interest on, all the relevant convertible bonds will ipso facto become and be immediately due and payable without any declaration or other act on the part of the trustee or any holder thereof so long as such case or proceeding has not been withdrawn or dismissed within 45 days. The requisite majority holders under each Convertible Bond Indenture may rescind or annul an acceleration and its consequences if (A) the rescission would not conflict with any court order or decree and (B) all existing events of default, except the nonpayment of principal, premium or interest that has become due solely because of the acceleration, have been cured or waived.

 

  (k) Subject to restrictions and limitations as specified in each Convertible Bond Indenture, the relevant majority holders thereunder may waive any past default or event of default and its consequences, other than certain specified default or event of default, including the failure to pay the principal of, or premium, if any, or interest on, any of the convertible bonds. When a default or an event of default is waived, it is cured and ceases to exist for all purposes under the Convertible Bond Indenture and the relevant convertible bonds.

 

  (l) A Scheme Creditor and holder of the 2018 Convertible Bonds and Preferred Convertible Bonds may not institute any proceeding under the relevant Convertible Bond Indenture or the convertible bonds unless holders of at least 25% in aggregate principal amount of such convertible bonds then outstanding make a written request to the trustee to pursue such remedy and the requisite majority holders under the Convertible Bond Indenture have not given the trustee a direction inconsistent with the request during a 60-day period.

 

  (m) Each Convertible Bond Indenture preserves, and does not impair, the right of any holder of the 2018 Convertible Bonds and the Preferred Convertible Bonds to receive payment of all amounts due with respect to such convertible bonds when due, to exercise its conversion right with respect to its convertible bonds, or to bring suit for the enforcement of any such payment or conversion right on or after such due dates.

 

  (n) The Preferred Convertible Bonds will have the benefit of (i) the Preferred Convertible Pledge Agreement; (ii) the LDK Silicon Pledge; and (ii) the Subsidiary Guarantee.

 

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13.7 The Exit Funding Arrangements

 

  (a) The JPL’s, for and on behalf of LDK Solar, have entered into a series of funding agreements for the purposes of financing the costs and expenses incurred by LDK Solar in implementing the Restructuring Proposal, the Cash Out Amounts and forecast working capital requirements of LDK Solar post restructuring. These Exit Funding Arrangements comprise:

 

  (i) The HRX Commitment, totalling US$24,000,000, as more fully described in paragraph 13.7(b) below. A copy of the HRX Commitment is also set out in Appendix 23 (HRX Commitment) to this Explanatory Statement; and

 

  (ii) The SPI Commitments, totalling US$4,999,900, as more fully described in paragraph 13.7(e) below. A copy of the commitment agreement documenting the SPI Commitments is also set out in Appendix 24 (SPI Commitment) to this Explanatory Statement.

The HRX Commitment

 

  (b) HRX has agreed, pursuant to the terms of the HRX Commitment, to provide an aggregate sum of US$24,000,000, consisting of:

 

  (i) The exit facility, being US$10,000,000, which may be drawn down at any time after 12 August 2014 (the “HRX Exit Facility”) to pay the amounts payable under the Restructuring Proposal, including the expenses of the provisional liquidation and the implementation of the Schemes and financing the Cash Option as more fully described in this Part 8 (Transaction Overview) of this Explanatory Statement; and

 

  (ii) A US$14,000,000 facility (the “Working Capital Facility”), which may be drawn down at any time up between the Effective Date and 30 September 2018.

 

  (c) The use of the funds under the HRX Exit Facility is subject to the following conditions precedent:

 

  (i) No material adverse change to the general affairs, management, financial position, shareholders’ equity or operations of LDK Solar and its subsidiaries;

 

  (ii) LDK Solar issuing the Second HRX Note, being a promissory note issued from time to time for the principal amount of the sums advanced, or to be advanced, under the HRX Exit Facility and the Working Capital Facility;

 

  (iii) LDK Solar issuing the Second HRX Warrant, being a warrant concerning 6,600,000 Shares, exercisable at the price of US$0.10 per Share;

 

  (iv) The Cayman Court sanctioning the entry into the HRX Commitment, the Second HRX Note from time to time for advances under the Exit Facility and the Second HRX Warrant;

 

  (v) The occurrence of the Effective Date under the Schemes; and

 

  (vi) All other conditions in the Second HRX Note and the Second HRX Warrant being satisfied.

 

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  (d) The Cayman Court sanctioned the terms of the HRX Commitment and the Second HRX Note on 11 August 2014. The JPL’s have drawn down the sum of US$10,000,000 under the HRX Exit Facility, with such sums held in escrow pending the Schemes becoming effective.

The SPI Commitments

 

  (e) SPI has agreed, pursuant to settlement arrangements with certain affiliates of LDK Solar to which it owes trade payables, to provide an aggregate sum of US$4,999,900, to be remitted to LDK Solar on the terms of the SPI Commitments for the purposes of implementing the Restructuring Proposal. The SPI Commitments are to comprise two cash payments, of US$2,281,263 to LDK Solar; and (ii) US$2,718,637 to LDK International, as follows:

 

  (i) In settlement of intercompany payables owing from SPI to LDK Solar, SPI shall wire-transfer a sum in the amount of US$2,281,263 to the account of LDK Solar, on or promptly after 12 August 2014. Such a sum shall be used by LDK Solar to (A) pay the balance of the trade payables due from SPI to LDK Solar, and (B) fulfil a pre-condition for the JPLs to submit the Cayman Scheme for sanctioning by the Cayman Court; and

 

  (ii) Pursuant to the terms of the SPI Commitment, SPI committed to pay the sum of US$2,718,637 to LDK International, on or promptly after 12 August 2014, as part payment for certain intercompany payables due from SPI to LDK International. LDK International has, in turn, agreed pursuant to the SPI Commitment to lend the sum of US$2,718,637 to LDK Solar pursuant to the terms of a loan agreement between LDK Solar and LDK International entered into on or around 7 August 2014 (the “LDK International Loan Agreement”). The LDK International Loan Agreement provides for an interest free loan which can be drawn down at any time provided the Grand Court has sanctioned LDK Solar entering into this agreement. On 11 August 2014, the Grand Court granted this order. A copy of the LDK International Loan Agreement is at Appendix 25 (ldk International Loan Agreement) to this Explanatory Statement.

 

  (f) The sum of US$4,999,900 payable under the SPI Commitments has been transferred to the account of the JPLs. The amounts payable pursuant to the LDK International Loan Agreement will be held pending the Schemes becoming effective.

 

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PART 9

 

14. OVERVIEW OF THE GROUP

 

14.1 LDK Solar

 

  (a) LDK Solar was incorporated in the Cayman Islands on 1 May 2006 as an exempted company limited by shares pursuant to the Companies Law, under registered number 166736.

 

  (b) LDK Solar’s registered office is c/o Zolfo Cooper (Cayman) Limited, 38 Market Street, Suite 4208 Canella Court, Camana Bay Grand Cayman KY1-9006, Cayman Islands.

 

  (c) Pursuant to the Articles of Association, LDK Solar’s authorised share capital is US$50,000,000 divided into 499,580,000 Scheme Shares with a par value of US$0.10 each and 420,000 shares of such class or designation as the LDK Board may determine in accordance with the Articles of Association.

 

  (d) The amount of paid up share capital is US$20.1 million. ADSs, each representing one issued Share, were listed on the NYSE up until 21 February 2014 when the NYSE suspended the trading of the ADSs. The NYSE subsequently commenced its delisting procedures in respect of the ADSs on 31 March 2014. The main shareholders of LDK Solar as of the date of this Explanatory Statement comprise:

 

Shareholder

   Shares owned
(including ADSs)
     Shareholding %  

LDK New Energy

     48,053,953         24.7   

Fulai Investments

     42,000,000         21.6   

HRX

     25,307,497         13.0   

Public float

     79,431,995         41.8   
  

 

 

    

 

 

 

Total

     194,793,445         100.0   
  

 

 

    

 

 

 

Source: LDK Solar

 

  (e) The objects for which LDK Solar was established are unrestricted and it is authorised to engage in any activity in accordance with the laws of the Cayman Islands and to exercise the functions of a natural person of full capacity irrespective of any question of corporate benefit.

 

  (f) LDK Solar is the ultimate parent of the Group, which includes a large number of intermediate holding and operating companies in the PRC, Hong Kong, Europe, North America and Japan.

 

  (g) LDK Solar is currently contemplating to effect a reverse split of its ADSs by changing the current ratio of one ADS representing one Share to a ratio of one ADS representing five Shares, to be effective (i) conditional upon a successful appeal by LDK Solar of the NYSE delisting decision, and (ii) reasonably before the resumption of the NYSE listing.

 

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14.2 Principal activities of the Group

 

  (a) The business of the Group is to manufacture and sell a variety of PV Products. Specifically, the Group produces polysilicon, mono and multicrystalline ingots, wafers, cells, modules, systems, power projects and solutions. Further details on the Group’s operations are set out in paragraphs 14.2(c) to 14.2(v) below.

 

  (b) The Group employed a workforce of 24,449 employees, 8,979 employees and 9,558 employees as of 31 December 2011, 2012 and 2013, respectively. The Group employed a workforce of 8,745 employees as of 30 June 2014. LDK Solar itself has no employees although makes payroll contributions where employees or other Group entities provide services to it.

Polysilicon

 

  (c) Polysilicon is a raw material used to manufacture solar wafers. The Group currently produces polysilicon for the PV industry that meets the needs of both monocrystalline and multicrystalline silicon-based PV applications. Polysilicon is produced in rods, broken into chunks, which the Group uses as feedstock in its solar wafer manufacturing or sells to other PV product manufacturers, who further process it into ingots, wafers, cells, and modules for PV applications.

 

  (d) The Group commenced production and sale of polysilicon in the third quarter of 2009 and currently operates two polysilicon plants (Mahong Plant and Xiacun Plant) with an aggregate installed annualized polysilicon production capacity of approximately 17,000 metric tons. For the years ended 31 December 2011 and 2012, the Group produced approximately 10,455 metric tons and 2,520 metric tons of polysilicon, respectively. Since the third quarter of 2012, however, the Group suspended its polysilicon production to allow for the installation of hydrochlorination systems to two of its three production lines at the Mahong Plant as a “de-bottlenecking initiative” while its PV Products were facing decreased market demand and depressed market prices.

 

  (e) Trichlorosilane, or TCS, is one of the most costly chemicals used in the production of polysilicon, and a significant amount of TCS may, in a fully “closed-loop” system, be produced by converting silicon tetrachloride, or STC, a by-product in the polysilicon production process, and feeding it back into the system. It is therefore important that the Group be able to convert the STC generated in its production process back into TCS to re-enter production, in order to increase its output and to reduce its production costs and environmental compliance costs. The Group’s polysilicon production facilities have used STC hot carbon rod reactors, or STC thermal converters, through a rather out-dated hydrogenation process to thermally convert STC into TCS. Over the years, due to the inefficiency of the STC thermal conversion process, the Group had to rely on third parties to off take excess STC from its production process and purchase TCS from external suppliers to feed into the production process. The de-bottlenecking initiatives of the Group consist of the construction of hydrochlorination facilities to run in parallel with its existing STC thermal converters, with the goal of fully implementing the initial design of the Mahong Plant as a fully closed loop system allowing more STC to be converted into TCS.

 

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  (f) The Group restarted one of the three production lines at its Mahong Plant in July 2014 with the existing STC thermal conversion system, but anticipates to test-run the hydrochlorination facilities in August or September 2014. The management of the Group expects the hydrochlorination facilities to eventually become the primary converter for STC into TCS and to have the STC thermal converters operate as a supplemental system to support the hydrochlorination conversion. Once the first polysilicon production line at Mahon Plant has ramped up in the test run with the newly added hydrochlorination facilities, the Group is expecting to restart the second polysilicon production line at Mahong Plant in the fourth quarter of 2014 with the hydrochlorination facilities attached to the production line in addition to the STC thermal converters. Currently there is no timetable to restart the third production line at Mahon Plant, and management is not expecting to have separate hydrochlorination facilities installed onto the third production line when it is restarted. The operations of the Xiacun Plant remain suspended, and resumption of operations will depend on, amongst other things, market demand for solar-grade polysilicon.

 

  (g) Set out in the table below is an illustrative summary of the level of the income generation arising from the manufacturing and production of polysilicon for 2011 and the first two quarters of 2012.

 

     2012  
     Q2      Q1  

Sales (US$ millions)

     14.5         13.3   

ASP (US$ per kg)

     23.92         28.85   

Shipments (MT)

     608         462   

 

     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     24.3         35.7         76.1         8.6   

ASP (US$ per kg)

     37.24         52.15         67.33         90.55   

Shipments (MT)

     653         685         1,130         95   

Source: LDK Solar

 

  (h) The Group’s two polysilicon plants occupy a site of approximately 3.1 million square meters in Xinyu Hi-Tech Industrial Park in the high-tech development zone of Xinyu City.

Solar Wafers

 

  (i) The Group manufactures solar wafers in its wafer production facilities in Xinyu City Hi-Tech Industrial Park in Jiangxi Province, PRC for sale globally to manufacturers of solar cells and solar modules. It has an aggregate annualised solar wafer production capacity of approximately 4.8 gigawatts. For the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, the Group produced approximately 2.2 gigawatts, 1.0 gigawatts, 1.4 gigawatts and 1.1 gigawatts of multicrystalline and monocrystalline solar wafers, respectively.

 

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  (j) Production of wafers can be divided into two main steps:

 

  (i) Production of Polysilicon Ingot: The Group prepares its polysilicon feedstock with de-ionised water in etching stations. The prepared polysilicon feedstock is then placed in crucibles and each crucible is loaded into a directional solidification system (“DSS”) furnace for melting and crystallization. Polysilicon ingots formed during the crystallization process are then cut into smaller blocks with a squarer, in a process known as squaring. The Group’s polysilicon ingots are currently approximately 525 kilograms and 7,750 kilograms in weight and 840 by 840 millimetres or 1,000 by 1,000 millimetres in width and 320 millimetres in height. The casting process for monocrystalline wafers is generally more expensive than that for multicrystalline wafers with similar dimensions. However, monocrystalline wafers are generally more efficient than multicrystalline wafers because the increased conductivity of electrons in monocrystalline silicon yields higher energy conversion rates than multicrystalline silicon.

 

  (ii) Wafering: After inspection, the polysilicon blocks are cropped and prepared for slicing, sliced into wafers by wire saws and then washed and dried at a wafer cleaning station before a final inspection, packaging and delivery.

 

  (k) Illustrated below is a diagram of the Group’s multicrystalline and monocrystalline ingot production and wafering process:

 

 

LOGO

Source: LDK Solar

 

  (l) Set out in the table below is an illustrative summary of the level of the income generation arising from the manufacturing and production of solar wafers for 2011 to second fiscal quarter of 2014.

 

     2014  
     Q2      Q1  

Sales (US$ millions)

     114.8         126.2   

ASP (US$ per watt)

     0.22         0.23   

Shipments (MW)

     513         541   

 

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     2013  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     117.6         81.1         66.7         54.4   

ASP (US$ per watt)

     0.21         0.21         0.22         0.23   

Shipments (MW)

     555         385         304         240   
     2012  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     45.6         68.2         79.9         58.8   

ASP (US$ per watt)

     0.25         0.30         0.25         0.36   

Shipments (MW)

     185         230         317         164   
     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     77.6         145.7         282.3         530.1   

ASP (US$ per watt)

     0.39         0.50         0.66         0.84   

Shipments (MW)

     197         292         429         631   

Source: LDK Solar

 

  (m) The Group’s wafer manufacturing facilities occupy a site area of approximately 3.6 million square meters in Xinyu Hi-Tech Industrial Park of the high-tech development zone of Xinyu City. The multicrystalline and monocrystalline wafer manufacturing operations of the Group are housed in four plants in the Xinyu Hi-Tech Industrial Park.

Solar Cells

 

  (n) The Group commenced solar cell production in the third quarter of 2010 at production facilities in Xinyu City Hi-Tech Industrial Park in Jiangxi Province, PRC. Including additional production facilities in Hefei City of Anhui Province, PRC, the Group had an aggregate annualised solar cell production capacity of approximately 1.7 gigawatts. The production facilities in Hefei City of Anhui Province, PRC, were sold in March 2013 as a part of the Group’s restructuring strategy. Further details of this sale are set out below. The Group’s current annualised solar cell production capacity is approximately 0.3 gigawatts. For the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, the Group produced approximately 590.0 megawatts, 162.1 megawatts, 80.6 megawatts and 67.9 megawatts of solar cells, respectively.

 

  (o) On 12 April 2013, a Group Company, Anhui LDK New Energy Co., Ltd. entered into an agreement to sell and transfer all of its interest in its then wholly owned subsidiary, LDK Solar High-Tech (Hefei) Co., Ltd. (“LDK Hefei”), located in Hefei City of Anhui Province in the PRC, the main producer of the Group’s solar cells and solar modules, to Hefei High Tech Industrial Development Social Service Corporation, an affiliate of the Hefei City Government (“Hefei High Tech”), for approximately RMB 121 million. It was a term of the agreement (amongst others) that LDK Hefei issued a guarantee to Hefei High Tech guaranteeing certain of LDK Hefei’s receivables and prepayments. Based on the book value, the Group realised a net loss of approximately US$90 million for this transaction.

 

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  (p) Set out in the table below is an illustrative summary of the level of the income generation arising from the manufacturing and production of solar cells for 2011 to second fiscal quarter of 2014.

 

     2014  
     Q2      Q1  

Sales (US$ millions)

     1.5         0.4   

ASP (US$ per watt)

     0.29         0.23   

Shipments (MW)

     5.2         1.6   

 

     2013  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     0.0         0.6         0.3         3.3   

ASP (US$ per watt)

     0.27         0.35         0.96         0.41   

Shipments (MW)

     0         2         0         8   
     2012  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     5.9         16.5         23.1         5.6   

ASP (US$ per watt)

     0.34         0.37         0.35         0.33   

Shipments (MW)

     17         45         66         17   
     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     13.6         3.5         —           —     

ASP (US$ per watt)

     0.36         0.67         —           —     

Shipments (MW)

     38         5         —           —     

Source: LDK Solar

 

  (q) The Group’s solar cell manufacturing facilities occupy a site area of approximately 0.8 million square meters in Xinyu Hi-Tech Industrial Park in Xinyu City.

Solar Modules

 

  (r) The Group commenced solar module production in 2010 and produces solar modules at its production facilities in Nanchang City of Jiangxi Province and Suzhou City of Jiangsu Province, PRC. It had an aggregate annualised solar module production capacity of approximately 1.7 gigawatts when the Group maintained additional production facilities in Hefei City of Anhui Province, PRC, which the Group sold in March 2013 as a part of the Group’s restructuring strategy. Further details of this sale are set out above. The Group’s current annualised solar module production capacity is approximately 1.4 gigawatts, and the Group also provides solar module processing services to customers. For the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, the Group produced approximately 840.0 megawatts, 191.6 megawatts, 261.6 megawatts and 95.0 megawatts of solar modules, respectively.

 

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  (s) Set out in the table below is an illustrative summary of the level of the income generation arising from the manufacturing and production of solar modules for 2011 to second fiscal quarter of 2014.

 

     2014  
     Q2      Q1  

Sales (US$ millions)

     10.6         19.5   

ASP (US$ per watt)

     0.64         0.72   

Shipments (MW)

     16.6         27.0   

 

     2013  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     73.6         45.9         18.7         15.9   

ASP (US$ per watt)

     0.60         0.60         0.54         0.69   

Shipments (MW)

     123         77         35         23   
     2012  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     34.4         79.6         55.2         108.0   

ASP US($ per watt)

     0.67         0.68         0.80         0.79   

Shipments (MW)

     52         117         69         137   
     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     227.9         217.8         107.8         190.5   

ASP (US$ per watt)

     1.05         1.13         1.36         1.60   

Shipments (MW)

     217         192         79         119   

Source: LDK Solar

 

  (t) The Group’s solar module manufacturing facilities occupy a site area of approximately 0.5 million square meters in Nanchang Hi-Tech Industrial Development Zone of Nanchang City.

Solar Farm Projects

 

  (u) The Group designs and develops solar farm projects in the PRC, Europe and the U.S. for sale to third parties upon completion. It also provides engineering, procurement and construction services for solar farm projects. Although the Group’s production facilities are located in Xinyu City and Nanchang City, both of Jiangxi Province, the Group’s products and subsidiary operations reach Europe, North America, the Asia Pacific region and other parts of the world, in addition to the PRC.

 

  (v) Set out in the table below is an illustrative summary of sales for the Group’s solar farm projects for 2011 to 2013 (excluding amounts for SPI and LDK Solar’s European operations).

 

     2013  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     0.9         0.2         0.6         —     
     2012  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     2.9         0.2         4.5         —     
     2011  
     Q4      Q3      Q2      Q1  

Sales (US$ millions)

     4.6         0.4         1.4         —     

Source: LDK Solar

 

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The table above excludes sales from the EPC business for SPI as well as the EPC business for LDK Solar’s European Operations. The full year sales amounts for SPI’s EPC business for 2011, 2012 and 2013 are US$35.6 million, US$65.8 million and US$40.9 million, respectively. The full year sales amounts for LDK Solar’s European EPC operations are US$10.8 million for 2011, and nil for each of 2012 and 2013.

 

14.3 The structure of the Group

 

  (a) The Group’s operations are structured into the Onshore Operations and the Offshore Operations. The Group’s Onshore Operations in the PRC consists of operations in Xinyu City and Nanchang City of Jiangxi Province, and Suzhou City of Jiangsu Province. The Group’s Offshore Operations comprises the Group’s operations in Europe, North America, Hong Kong and Japan.

The Onshore Operations

 

  (b) The Group’s principal manufacturing facilities are in its Onshore Operations, located in Xinyu City and Nanchang City of Jiangxi Province, and Suzhou City of Jiangsu Province.

 

  (c) The Group’s key onshore trading companies comprise of the Onshore Operating Entities. In particular, the main material Onshore Operating Entities comprise:

 

  (i) Jiangxi LDK Solar;

 

  (ii) Jiangxi LDK Silicon;

 

  (iii) Jiangxi LDK Polysilicon;

 

  (iv) LDK Solar Nanchang;

 

  (v) LDK Solar Suzhou; and

 

  (vi) LDK PV Xinyu.

 

  (d) Jiangxi LDK Silicon and Jiangxi LDK Polysilicon were established in July 2007 and October 2007, respectively, both in Jiangxi Province, PRC, to engage in the polysilicon manufacturing business. LDK Solar then reorganised its polysilicon business structure so that Jiangxi LDK Silicon and Jiangxi LDK Polysilicon became wholly owned subsidiaries of LDK Silicon Holding, an entity incorporated in Hong Kong, which is wholly owned by LDK Silicon.

The Offshore Operations

 

  (e) As set out in the Corporate Structure Chart, LDK Solar is the parent company in the Group and oversees the Offshore Operations. The Group established its offshore presence in order to access the international capital markets to finance the Group’s existing operations, to expand into the global PV markets, and to acquire offshore PV operations. The Group’s most notable offshore acquisitions consist of the Sunways Acquisition and the SPI Acquisition.

 

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  (f) Since the appointment of the JPLs on 27 February 2014, the head office functions of LDK Solar have been carried exclusively out of the Cayman Islands. Since their appointment, the JPLs have engaged in the following activities, amongst others:

 

  (i) Changing the location of LDK Solar’s registered office (previously in Cayman Islands) to the office of the JPLs (which is also located in the Cayman Islands);

 

  (ii) Taking possession of LDK Solar’s statutory books, records and registers, which have always been maintained at its registered office in the Cayman Islands;

 

  (iii) Reviewing, analysing, negotiating and signing the Initial HRX Promissory Note and the Exit Funding Arrangements for and on behalf of LDK Solar;

 

  (iv) Opening bank accounts in the Cayman Islands in LDK Solar’s name; these bank accounts have held all financing proceeds obtained by the JPLs on behalf of LDK Solar and currently serve as the primary cash management accounts for LDK Solar; as of the date hereof, approximately US$10.4 million is held in LDK Solar’s Cayman Islands bank accounts;

 

  (v) Negotiating and signing the Senior RSA and the Preferred RSA, including amendments thereto, with holders of more than a majority of the Senior Notes and other key constituencies;

 

  (vi) Negotiating and documenting the terms of settlement with the Munich Re Companies;

 

  (vii) Securing the support of the Insolvency Administrator of Sunways to the Schemes;

 

  (viii) Assisting in the planning of, and the implementation of, the terms of the Restructuring Proposal and the Schemes;

 

  (ix) Negotiating and agreeing the terms of engagement with various advisers and service providers, both in the Cayman Islands and elsewhere, including but not limited to:

 

  (A) Lucid in respect of the Information Agent Agreement;

 

  (B) KPMG in respect of the KPMG Engagement and for the provision of certain tax advice in connection with the Restructuring Proposal;

 

  (C) Jefferies in respect of their engagement as financial adviser to LDK Solar;

 

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  (D) Sidley, as global legal advisers to the JPLs;

 

  (E) Campbells, as Cayman Islands legal advisers to the JPLs;

 

  (F) The Ad Hoc Advisers;

 

  (G) BNY in respect of their various roles in the restructuring, including as Senior Note Trustee, CN Trustee, 2018 Convertible Bond Trustee and the Preferred Convertible Bond Trustee;

 

  (x) Chairing calls from the Cayman Islands involving the LDK Advisers at least twice weekly;

 

  (xi) Chairing, by way of teleconference, a creditors’ meeting and multiple liquidation committee meetings held by teleconference from the Cayman Islands;

 

  (xii) Overseeing liaison with the NYSE regarding the NYSE Appeal;

 

  (xiii) Overseeing liaison with subsidiaries and group companies regarding funding requirements;

 

  (xiv) Negotiating and signing funding agreements on behalf of LDK Solar;

 

  (xv) Reviewing LDK Solar’s intercompany accounts and collecting intercompany receivables;

 

  (xvi) Signing sworn affidavits on behalf of LDK Solar;

 

  (xvii) Responding to enquiries from LDK Solar’s creditors and potential investors concerning the Restructuring Proposal;

 

  (xviii) Considering and planning the Schemes to effect a successful restructuring;

 

  (xix) Approving and signing press releases in respect of the affairs of LDK Solar and the Group, all of which indicate that LDK Solar is in Cayman provisional liquidation and include Cayman Islands contact information

 

  (xx) Sending notice to all of LDK Solar’s known creditors, informing creditors of the pendency of the Cayman proceeding, the appointment of the Cayman-based JPLs to oversee the management of the day-to-day affairs of LDK Solar, and the date, time and Cayman Islands location of the statutory meeting of creditors. Notice was sent from the Cayman Islands with a Cayman Islands return address;

 

  (xxi) Corresponding the calls with LDK Solar’s liability management committee;

 

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  (xxii) Chairing the Group’s liability management committee calls from the Cayman Islands;

 

  (xxiii) Paying company and provisional liquidation expenses;

 

  (xxiv) Corresponding with directors regarding the cessation of their powers, subject to the terms of the Directors Protocol;

 

  (xxv) Negotiating the terms for the engagement of KPMG to complete the audit of the 2013 consolidated group accounts;

 

  (xxvi) Co-ordinating investigations into related party transactions entered into by LDK Solar with entities owned directly or indirectly by Mr Peng and his family, and co-ordinating the discussions with the Board of Directors and certain key stakeholders that resulted in Mr. Peng resigning on 29 August 2014 his position as Chairman of LDK Solar with immediate effect, and resigning from his executive and director positions with certain Subsidiaries of LDK Solar (excluding SPI) on such dates to be determined by the JPLs;

 

  (xxvii) Following Mr Peng’s resignation on 29 August 2014, identifying Mr Xingxue Tong as Interim Chairman; and

 

  (xxviii) Identifying deficiencies in LDK Solar’s corporate governance policies and procedures and recommending enhancements, including the limitation on related party transactions and identifying potential new non-executive directors.

 

  (g) Prior to the appointment of the JPLs, the Group established a Hong Kong presence which has served as a connection with many of its Offshore Operations, including its offshore capital market financings, bank financings, business acquisitions, and treasury operations. Prior to the appointment of the JPLs, the Group consummated a significant amount of offshore purchases of equipment and feedstock as well as the sales of PV Products offshore via its Hong Kong office.

SPI

 

  (h) On 5 January 2011, LDK Solar, through its wholly owned subsidiary LDK Solar USA, entered into a share purchase agreement with SPI to (i) subscribe for 42,835,947 shares of common stock for an aggregate purchase price of US$10.7 million; subscribe for 20,000,000 shares of series A preferred stock of SPI for an aggregate purchase price of US$22 million; and (iii) purchase certain manufacturing equipment used for the manufacture of solar modules and other solar system products for US$0.4 million (the “SPI Acquisition”). Completion of the SPI Acquisition took place on 31 March 2011. As a result of the SPI Acquisition, LDK Solar, through LDK Solar USA is the beneficial owner of 70% of the shareholding in SPI. SPI’s shares are listed and traded on the OTC Bulletin Board.

 

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  (i) On 30 April 2014, SPI signed a share purchase agreement with a group of investors, securing new investment proceeds of US$21.75 million, which was completed on 15 July 2014 (the “SPI Placement”). It is intended that the proceeds from this placement will be used to pay out certain of SPI’s debts and other working capital expenses of SPI. On 22 July 2014, SPI executed a share purchase agreement with a group of non-U.S. investors on a private placement basis, securing commitment for further investment with total proceeds of US$25.0 million, from the sale of 92,620,000 shares of common stock at a price of US$0.27 per share (the “Second SPI Placement”). It is intended that the proceeds from the Second SPI Placement will be used for the expansion of SPI’s global PV project activities, continued investment in its YES! Solar Solutions business for residential and small business markets, for working capital purposes and to pay down debt.

 

  (j) Following the completion of the SPI Placement, LDK Solar USA and LDK Europe’s shareholding in SPI reduced from 70% to 42.4%. After the Second SPI Placement is completed, LDK Solar USA and LDK Solar Europe’s shareholding in SPI will be further diluted to 33.2%. Whilst LDK Solar USA and LDK Solar Europe’s shareholding in SPI will reduce below 50%, the JPLs, as the party charged with managing substantially all of the Offshore Operations, are advised by SPI’s management that LDK Solar USA and LDK Solar continue to possess, directly or indirectly through their ownership of SPI voting securities and otherwise, the power to direct or cause the direction of the management and policies of SPI.

Sunways

 

  (k) Pursuant to an investment agreement dated 31 December 2011, LDK Solar, through its wholly owned subsidiary LDK Germany, acquired approximately 71% of the equity interest in Sunways, a German stock corporation with shares listed on the Frankfurt Stock Exchange, through capital increases by Sunways against LDK Solar’s cash contribution and contributions in kind followed by a public tender offer consummated in April 2012 (the “Sunways Acquisition”). As set out in paragraphs 6.3(s) to 6.3(z) of Part 1 (Background to the Schemes and the Chapter 11 Plan), Sunways filed for preliminary insolvency proceedings in Germany on 21 March 2014 and was placed into insolvency proceedings by the local German court on 28 April 2014.

 

14.4 NYSE Listing

 

  (a) ADSs representing LDK Solar’s shares were listed on the NYSE following the close of LDK Solar’s initial public offering on 6 June 2007. The NYSE initially imposed a trading halt on LDK Solar’s ADSs on 21 February 2014 following submission of LDK Solar’s winding up petition to the Court (since the trading halt, the “Suspension Period”).

 

  (b) The JPLs’ legal advisers maintained regular contact with the NYSE during the Suspension Period. Prior to 28 March 2014 the NYSE had agreed to lift the trading halt once LDK Solar had signed the Senior Note RSA with the Consenting Senior Note Scheme Creditors and the Preferred RSA with the Consenting Preferred Obligation Scheme Creditors, subject to sanction by the Grand Court.

 

141


  (c) The NYSE required that a press release reporting the signing of the RSAs (clearly disclosing the requirement for the sanction of the RSAs by the Grand Court) be provided in draft form to the NYSE for approval on the basis that the trading halt would be lifted from the beginning of the trading day following the issue of the press release. That press release was provided in draft to the NYSE on 21 March 2014 and made public on 28 March 2014.

 

  (d) Further, on 28 March 2014, the NYSE indicated that it planned to terminate the Suspension Period and to resume trading on the NYSE based upon LDK Solar’s disclosure regarding the execution of the RSAs. Ultimately, however, the NYSE determined not to allow the resumption of trading on the NYSE, and instead moved to suspend trading effective immediately. On 31 March 2014, the NYSE issued its determination to immediately suspend trading in LDK Solar’s shares and to initiate delisting proceedings based upon (i) “abnormally low” price indications for LDK Solar’s ADSs, which, according to the NYSE, rendered the securities unsuitable for listing; and (ii) LDK Solar’s announcements regarding the appointment of the JPLs and subsequent execution of the RSAs.

 

  (e) LDK Solar, acting through the JPLs, lodged a notice of appeal of the NYSE’s ruling (the “NYSE Appeal”) and filed a written submission in furtherance of the NYSE Appeal on May 8, 2014. The NYSE Appeal, which was originally scheduled to be heard on 26 June 2014, was adjourned by the NYSE and is now due to be heard on 9 September 2014.

 

  (f) Pending the hearing of the NYSE Appeal, the ADSs are currently quoted on the OTC Pink Limited Information under the symbol “LDKSY”. As at 2 September 2014, the ADSs were trading on the OTC Pink Limited Information at US$0.42 per share.

 

14.5 Financial Statements

 

  (a) Each year, LDK Solar files an annual report pursuant to section 13 or 15 of the US Securities Act with the SEC. The most recent annual report filed with the SEC for the Group, being the 2012 Annual Report, is set out in Appendix 33 (Trust Distribution Deed).

 

  (b) The auditors of LDK Solar are KPMG Huazhen (Special General Partnership) (“KPMG Huazhen”) and KPMG Hong Kong (“KPMG Hong Kong”). KPMG Huazhen and KPMG Hong Kong are each a registered auditor and qualified to practice in the PRC and Hong Kong, respectively. KPMG Huazhen and KPMG Hong Kong are each registered with, and subject to the oversight of, the Public Company Accounting Oversight Board (known as the PCAOB) created by the U.S. Sarbanes-Oxley Act of 2002 as accounting professionals who provide independent audit reports for publicly traded companies in the United States.

 

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  (c) The Group has prepared and submitted to the SEC unaudited condensed consolidated quarterly financial information for the fiscal quarters ended 31 March, 30 June and 30 September 2013 (“Unaudited Quarterly Accounts”), which are each set out in Appendix 42 (Unaudited Quarterly Accounts) to this Explanatory Statement.

 

  (d) In connection with the Schemes, the Group has also prepared unaudited condensed consolidated management account information for the fiscal year ended 31 December 2013 and for the six months ended 30 June 2014 as set out in Appendix 40 (Unaudited Management Accounts to 31 December 2013) and Appendix 41 (Unaudited Management Accounts to 30 June 2014) to this Explanatory Statement.

 

  (e) The unaudited condensed consolidated management account information for the fiscal year ended 31 December 2013 and for the six months ended 30 June 2014 is preliminary in nature, is provided to Scheme Creditors for reference only and is subject to change and adjustment upon audit.

 

14.6 Engagement of KPMG

 

  (a) In accordance with the US Exchange Act and the requirements of the SEC, LDK Solar is required to submit consolidated annual accounts in the form of an annual report within four months after the end of the relevant fiscal year. In the case of the accounts for the fiscal year ended 31 December 2013, the annual report on Form 20-F was required to be filed by 30 April 2014, unless otherwise extended pursuant to the US Exchange Act.

 

  (b) Prior to the appointment of the JPLs, LDK Solar owed KPMG RMB 15,604,765 on account of work performed by KPMG in connection with the 2012 Annual Report and the completion of quarterly limited procedures for the quarters ended 31 March 2013, 30 June 2013 and 30 September 2013, respectively (the “Outstanding Fees”). Due to LDK Solar’s lack of available funds to pay the Outstanding Fees, the audit process for the year ended 31 December 2013 (the “2013 Audit”), which the JPLs understand would usually be commenced by LDK Solar in January, was not started before the JPLs appointment.

 

  (c) The February 2014 Order authorised the JPLs to instruct KPMG to complete the audit of LDK Solar’s financial statements and the consolidated financial statements of the Group for the year ended 31 December 2013 so that LDK Solar could make the necessary filings with the SEC.

 

  (d) KPMG estimated that from the date on which they were instructed it would take approximately three months to complete the 2013 Audit. Following the JPLs’ appointment, they determined it was not feasible for the 2013 Audit to be completed by the SEC deadline of 30 April 2014 as KPMG had not been instructed to commence the audit as at the date of their appointment. Until LDK Solar completes the 2013 Audit, LDK Solar is not compliant with the NYSE’s continued listing criteria. Pursuant to Section 802.01E of the NYSE’s Listed Company Manual, if LDK Solar’s annual report on Form 20-F for any fiscal year is not filed within six months of the due date for such filing (for the fiscal year ended 31 December 2013 in LDK Solar’s case, 31 October 2014), the NYSE can, in its sole discretion, institute suspension and delisting procedures (it should be noted that the NYSE already commenced suspension and delisting procedures on 31 March 2014 as referred to at paragraph 15.5(d) above).

 

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  (e) The JPLs are of the view that taking steps to rectify LDK Solar’s compliance with the NYSE’s continued listing criteria, in particular by instructing KPMG to complete the 2013 Audit so that its annual report on Form 20-F for the fiscal year ended 31 December 2013 may be filed before 31 October 2014, is fundamental to enabling LDK Solar to be able to prosecute its appeal to the NYSE against the NYSE’s decision to delist the ADSs representing LDK Solar’s shares. Even if the NYSE Appeal is unsuccessful, the 2013 Audit will be necessary in connection with the listing of LDK Solar’s ADSs/Shares on any alternative exchange, for keeping the Scheme Creditors and the investing public informed of the developments, financial and otherwise, in the Group, and generally for the continuation of LDK Solar following implementation of the Restructuring Proposal.

 

  (f) The JPLs, for and on behalf of LDK Solar, together with Jiangxi LDK Solar, have re-engaged KPMG to complete the 2013 Audit in order to ensure the filing of LDK Solar’s annual report on Form 20-F for the fiscal year ended 31 December 2013 as soon as practicable and in any event by 31 October 2014 (the “KPMG Engagement”). Pursuant to the terms of the KPMG Engagement (amongst others):

 

  (i) KPMG’s unpaid fees totalling RMB 15,604,765 in respect of the completion of the 2012 audit and the quarterly limited procedures for the quarters ended 31 March 2013, 30 June 2013 and 30 September 2013 are payable by LDK Solar (as an expense of the provisional liquidation) and Jiangxi LDK Solar in accordance with an agreed payment plan;

 

  (ii) KPMG’s fees for the 2013 Audit of RMB 4,875,000 are payable by LDK Solar (as an expense of the provisional liquidation) and Jiangxi LDK Solar in accordance with an agreed payment plan; and

 

  (iii) KPMG’s engagement can be terminated by any of the parties on seven days’ notice with the 2013 Audit costs payable on a time spent basis up to the date of termination.

 

  (g) The terms of KPMG’s engagement, including the payment of KPMG’s unpaid fees, were sanctioned by the Grand Court on 10 July 2014 pursuant to the July 2014 Orders.

 

  (h) KPMG are currently working with LDK Solar and Jiangxi LDK Solar to complete the 2013 Audit and it is currently anticipated that the 2013 Audit will be completed by 31 October 2014.

 

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14.7 Structure of the Group

 

  (a) A copy of the current corporate structure chart of the Group is set out in Appendix 15 (Corporate Structure Chart) of this Explanatory Statement.

 

  (b) Appendix 16 (Current Financing and Security Structure for the LDK Offshore Entities) to Appendix 17 (Post-restructuring Finance and Security Structure for the LDK Offshore Entities) of this Explanatory Statement also includes the following structure charts:

 

  (i) Current financing and security structure for the Offshore Group; and

 

  (ii) Post-restructuring financing and security structure for the Offshore Group.

 

  (c) Appendix 16 (Current Financing and Security Structure for the LDK Offshore Entities) and Appendix 17 (Post-restructuring Finance and Security Structure for the LDK Offshore Entities) includes the current and the post-restructuring debt and security structure for the Offshore Group only. As at 31 March 2014, 127 facility agreements were entered into concerning the Onshore Operating Entities. An overview of the financing arrangements concerning the Onshore Operating Entities is set out in paragraph 14.10 of this Part 9 (Overview of the Group) of this Explanatory Statement.

 

14.8 Registered Addresses of the Scheme Companies

LDK Solar

 

  (a) The registered address of LDK Solar is:

Floor 4, Willow House,

Cricket Square,

George Town,

Grand Cayman KY1-1103.

LDK Silicon

 

  (b) The registered address of LDK Silicon is:

Floor 4, Willow House,

Cricket Square,

George Town,

Grand Cayman KY1-1103.

 

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LDK Silicon Holding

 

  (c) The registered address of LDK Silicon Holding is:

Unit 2301, 23/F.,

FWD Financial Centre,

308 Des Vœux Road Central,

Shaun Wan,

Hong Kong.

 

14.9 Financing of the Offshore Operations

 

  (a) The Group has undertaken many offshore financing transactions since its initial public offering in June 2007. The following paragraphs explain the offshore financing arrangements and their proposed treatment under the Restructuring Transactions.

 

  (b) LDK Solar’s offshore financing arrangements consist of:

 

  (i) the Senior Notes (see paragraphs 14.9(c) to 14.9(l) below);

 

  (ii) the Preferred Obligations (see paragraphs 14.9(m) to 14.9(s) below);

 

  (iii) the CNs and CN Settlement Agreements (see paragraph 14.9(t) below); and

 

  (iv) the amounts advanced under the Project Loans and the Project Guarantees (see paragraphs 14.9(u) to 14.9(v) below).

The Senior Notes

 

  (c) The Senior Notes comprise a Senior Global Note issued pursuant to the Senior Note Indenture, along with a private placement of an additional RMB 500 million. The Senior Notes (and the Senior Note Indenture) are governed by the laws of the State of New York.

 

  (d) The Senior Notes were originally offered and sold by LDK Solar pursuant to an underwriting agreement dated 18 February 2011, between LDK Solar, the Senior Note Guarantors, Morgan Stanley & Co. International plc and Citigroup Global Markets Limited.

 

  (e) The Senior Notes were initially represented by global notes issued on 28 February 2011, in fully registered form without interest coupons attached, and in minimum denominations of RMB 1,000,000, and integral multiples of RMB 10,000 in excess thereof. Such notes were deposited with the Common Depositary or its nominee and registered in the name of the Common Depositary for the accounts of Euroclear and Clearstream. So long as the Common Depositary or its nominee is the registered owner of the Senior Global Note, it shall be considered the registered holder of the Senior Notes.

 

  (f) Under certain circumstances such Senior Notes could also be issued in the form of certificated notes, being registered in the name of such person, and in minimum denominations of RMB 1,000,000, and integral multiples of RMB 10,000 in excess thereof. At such a time as all the beneficial interest in the Senior Global Notes are exchanged for Senior Notes in certified form or the Senior Global Notes are redeemed, repurchased or cancelled in whole and not in part, the Senior Global Note is to be returned to, or retained and cancelled by the Trustee.

 

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  (g) Under the terms of the Senior Note Indenture, LDK Solar is subject to the following obligations (amongst others):

 

  (i) to pay the principal of, any premium on (if any) and interest (including Defaulted Interest as defined below) on such Senior Notes, in U.S. dollars, by no later than 10:00 a.m. London time, on each interest payment date, being 28 February and 28 August of each year, commencing 28 August 2011, and ending on the maturity date, being 28 February 2014;

 

  (ii) that it will not cause or permit any of its restricted subsidiaries (as therein defined) to directly or indirectly incur any indebtedness, save for those permitted types of indebtedness as described in the Senior Note Indenture. LDK Solar also covenants that such restricted subsidiaries will not directly, or indirectly, make any restricted payments as described in the Senior Note Indenture, or consummate any asset sale unless such a sale adheres to the conditions set out in the Senior Note Indenture; and

 

  (iii) that it will not permit any restricted subsidiary that is not a Senior Note Guarantor to guarantee any indebtedness of LDK Solar or another restricted subsidiary, unless contemporaneously therewith effective provision is made to guarantee or secure the Senior Notes on an equal and rateable basis with such guarantee so long as such guarantee remains effective, and in the amount of the indebtedness guaranteed.

 

  (h) The Senior Notes are also redeemable where LDK Solar gives notice of redemption, with the relevant Senior Notes becoming due and payable at the U.S. dollar settlement amount as defined in the Senior Note Indenture, together with accrued and unpaid interest, on the redemption date. If LDK Solar fails to pay any Senior Note called for redemption upon its surrender for redemption, the principal shall, until paid, bear interest from the date of redemption.

 

  (i) Pursuant to the terms of the Senior Note Indenture, the following events (amongst others) are events of default:

 

  (i) default of payment when due, of the principal or premium in respect of the Senior Notes;

 

  (ii) the failure of LDK Solar or any restricted subsidiary to comply with any covenants or agreement contained in the Senior Note Indenture or the Senior Notes for 30 days or more after written notice to LDK Solar;

 

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  (iii) the failure LDK Solar or any of its restricted subsidiaries to pay one or more final judgments against any of them which are not covered by adequate insurance, which judgments are not paid for a period of 60 days or more;

 

  (iv) an involuntary case or other proceeding is commenced against LDK Solar or a restricted subsidiary with respect to it or its debts under any applicable bankruptcy, insolvency, or similar law seeking the appointment of a receiver, liquidator or similar official, where such proceedings remain un-dismissed for a period of 60 days; and

 

  (v) LDK Solar or any restricted subsidiary commences a voluntary case under any applicable insolvency or similar law, or in the alternative consents to an involuntary case under any such law.

 

  (j) If an event of default as described above occurs, the Trustee may, and upon the request of 25% in principal amount of the outstanding Senior Notes shall, declare the unpaid principal (and premium, if any) and accrued interest to be immediately due and payable. However, the holders of a majority in aggregate principal amount may, after the Trustee has issued a notice of acceleration, instruct the Trustee to rescind and cancel the notice of acceleration.

 

  (k) LDK Solar’s obligations under the Senior Notes are guaranteed on a joint and several basis by the Senior Note Guarantors. Pursuant to the terms of the Senior Note Indenture, each Senior Note Guarantor agrees (amongst other things):

 

  (i) to guarantee, jointly and severally, the payment, when due, of the obligations under the Senior Notes. Each Senior Note Guarantor also agrees that such a guarantee will be a guarantee of payment when due (and not a guarantee of collection);

 

  (ii) to waive any act or omission which might delay or constitute a discharge to such Senior Note Guarantor’s obligations pursuant to the Senior Note Indenture; and

 

  (iii) that it will not, and LDK Solar will not cause directly or indirectly, any Senior Note Guarantor to consolidate with or merge into, or sell or dispose of all or substantially all of its assets to any person (other than LDK Solar) that is not a Senior Note Guarantor unless an event of default has occurred and is continuing

 

  (l) As set out in paragraph 14.9(g)(i) above, the final maturity of the Senior Notes occurred on 28 February 2014 when the amount of RMB 1,794,760,000 (being approximately US$295,677,100) comprising the principal amount of RMB 1,631,600,000 and interest of RMB 163,160,000 became due and payable by LDK Solar to the Senior Note Scheme Creditors.

 

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The Preferred Obligations

 

  (m) CDBCC (a wholly owned subsidiary of CDB), Excel Rise and Prosper East (investment funds affiliated with China Construction Bank Corporation), and Apollo (an investment fund affiliated with Bank of China Limited) agreed on 30 December 2010 to subscribe for the Preferred Shares, which represented, on an as-if-converted basis, approximately 18.46% of the aggregate issued and outstanding share capital of LDK Silicon on a fully diluted basis, for an aggregate original purchase price of US$240 million. On 15 April 2011, CDBCC assigned all its rights, title, interest, benefit and obligations under the Preferred Documents to CDB International (another wholly owned subsidiary of CDB). On 3 June 2011, CDB International, Excel Rise, Prosper East, and Apollo completed their subscription of the Preferred Shares subsequent to the receipt of various PRC governmental approvals relating to their investments as State-owned financial institutions in a foreign enterprise. On 6 January 2014, Excel Rise assigned all its rights, title, interest, benefit and obligations under the Preferred Documents with respect to 15,000,000 Preferred Shares to New Lane (another investment fund affiliated with China Construction Bank Corporation).

 

  (n) The Preferred Shares were issued pursuant to the terms of the Preferred Documents. The Subscription Agreement and the Shareholders Agreement are each governed by the laws of Hong Kong.

 

  (o) Under the Preferred Documents, the Preferred Obligors and Mr Peng agreed to be bound by a put option whereby they agreed to purchase each Preferred Share for the Put Option Exercise Price plus the IRR (the “Put Option”), in each case as proportionally adjusted for share subdivisions, share dividends, reorganisations, reclassifications, consolidations or mergers, upon the occurrence of material breaches under the Preferred Documents (“Redemption Event”), including but not limited to:

 

  (i) the failure to carry out the post-closing restructuring, being the transfer of 100% of the equity interest of both Jiangxi LDK Silicon and Jiangxi LDK Polysilicon to LDK Silicon Holding, and the obtaining of the relevant licences and approvals in respect of the operation of Jiangxi LDK Silicon and Jiangxi LDK Polysilicon; and

 

  (ii) the failure of LDK Silicon to carry out its Qualified IPO.

 

  (p) Each investor upon a Redemption Event is entitled to vote, either as a separate class or on a converted basis, to require LDK Silicon or LDK Solar to redeem or purchase (out of funds legally available, including capital) within two months of LDK Silicon’s receipt of the investor’s written notice, the Preferred Shares held by such an investor for a sum equal to the purchase price for the Preferred Shares paid by such an investor (adjusted for any share splits, share dividends, combinations, recapitalisations, and similar transactions), plus the IRR for the subscription price (again, adjusted for any share splits, share dividends, combinations, recapitalisations, and similar transactions).

 

149


  (q) The Preferred Obligors have also provided the following covenants:

 

  (i) where LDK Silicon fails to achieve an audited consolidated profit of not less than 95% of US$40,000,000 in year 2010 as calculated under the HKFRS, they shall on a joint and several basis within seven business days of the release of the 2010 financial statements of LDK Silicon, pay to each investor a cash sum equal to the subscription price paid by each investor multiplied by (1 – the actual audited consolidated net profit of LDK Silicon in year 2010/US$40,000,000), provided that this sum does not exceed 23% of the subscription price paid by each investor paid for the Scheme Shares; and

 

  (ii) where LDK Silicon fails to achieve an audited consolidated profit of not less than 95% of US$200,000,000 in year 2011 as calculated under the HKFRS, they shall on a joint and several basis within seven business days of the release of the 2011 financial statements of LDK Silicon, pay to each investor a cash sum equal to the subscription price paid by each investor multiplied by (1 – the actual audited consolidated net profit of LDK Silicon in year 2010/US$200,000,000), provided that this sum does not exceed 23% of the subscription price paid by each investor paid for the Scheme Shares

 

  (r) Under the terms of the Preferred Documents, Mr Peng also entered into the Apollo Guarantee.

 

  (s) Further, LDK Solar also entered into the Preferred Pledge Agreement whereby LDK Solar granted a pledge in favour of CDBCC of 15% of its equity in Jiangxi LDK Solar as security for the IRR owed to CDBCC. Where the Preferred Obligor failed to fulfil the IRR for the benefit of CDBCC, CDBCC could exercise the aforesaid at any time in accordance with the Preferred Pledge Agreement, as governed by the laws of the PRC.

The Restructured CN Loans

 

  (t) As set out in paragraphs 6.3(bb) to 6.3(ff) of Part 1 (Background to the Schemes and the Chapter 11 Plan), LDK Solar entered into thirteen settlement agreements with former CN Holders who held an aggregate principal amount of US$22,177,000 under the CNs as at 30 September 2013. The purpose of the Restructured CN Loans was to postpone and reschedule the repayment of the certain amounts owing under the CNs. The Restructured CN Loans are governed by the laws of Hong Kong in respect of five of these agreements, with the remaining agreements governed by the laws of the state of New York. As at 21 February 2014, the cumulative amount of US$4,934,143 was owing under the Restructured CN Loans and the CNs.

 

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Project Loans & the Project Guarantees

 

  (u) LDK Solar also entered into four acquisition and project finance loans in its capacity as a borrower with the lenders set out in the table below. The following security was granted pursuant to these loans:

 

  (i) The facility advanced by CDB Hong Kong is secured by (A) the SPI Share Pledge; (B) the LDK Receivables Pledge; and (C) the LDK Jiangxi Guarantee; and

 

  (ii) The remaining facilities granted by CDB Jiangxi are secured by:

 

  (A) the North Palm Springs Pledge;

 

  (B) security over all assets of North Palm Springs in connection with the NPS1A Project;

 

  (C) security over all assets of North Palm Springs in connection with the NPS4A Project; and

 

  (D) an unsecured all moneys guarantee from Mr Peng in favour of CDB Jiangxi.

 

Borrower

  

Lender

   Amount owing as
at March 2014
     Maturity Date     

Purpose

  

Governing

Law

LDK Solar

   CDB Hong Kong    US$ 11,000,000         28 March 2016       Acquisition financing    Hong Kong

LDK Solar

   CDB Jiangxi    RMB 32,600,000         17 April 2027       PV project financing    English law

LDK Solar

   CDB Jiangxi    US$ 6,080,000         30 December 2026       PV project financing    English law

LDK Solar

   CDB Jiangxi    US$ 6,520,000         13 March 2027       PV project financing    English law

Source: LDK Solar

 

  (v) LDK Solar also granted an unsecured guarantee in favour of CDB Jiangxi concerning LDK Solar Europe’s obligations under various project financing loans, as set out in the table below.

 

Borrower

  

Lender

  

Guarantor

   Amount owing as
at March 2014
    

Purpose

  

Governing
Law of the
facilities

LDK Solar Europe

   CDB Jiangxi    LDK Solar    1,175,000       PV project financing    English law

LDK Solar Europe

   CDB Jiangxi    LDK Solar    1,000,000       PV project financing    English law

LDK Solar Europe

   CDB Jiangxi    LDK Solar    1,175,000       PV project financing    English law

LDK Solar Europe

   CDB Jiangxi    LDK Solar    895,000       PV project financing    English law

LDK Solar Europe

   CDB Jiangxi    LDK Solar    RMB 9,100,000       PV project financing    PRC

LDK Solar Europe

   CDB Jiangxi    LDK Solar    RMB 7,700,000       PV project financing    PRC

LDK Solar Europe

   CDB Jiangxi    LDK Solar    RMB 9,100,000       PV project financing    PRC

LDK Solar Europe

   CDB Jiangxi    LDK Solar    RMB 6,400,000       PV project financing    PRC

Source: LDK Solar

 

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  (w) In addition to the amounts financed under the Project Loans and the Project Guarantees, SGT, a wholly owned subsidiary of SPI also entered into loan agreements with various lenders up to an amount of approximately €950,000. None of the Scheme Companies are guarantors under these loans.

Funding of the provisional liquidation

 

  (x) LDK Solar, and subsequently, the JPLs (for and on behalf of LDK Solar) have managed to secure various forms of funding to fund the provisional liquidation and pay the costs and expenses to be incurred in implementing the Restructuring Proposal. These forms of funding include:

 

  (i) Shortly before the appointment of the JPLs, a sum of US$6 million was received by LDK Solar from an intercompany transaction which has been utilised by the JPLs to finance the costs of the provisional liquidation of LDK Solar;

 

  (ii) The Initial HRX Promissory Note, being a convertible promissory note issued by LDK Solar. Under this arrangement, HRX lent US$3 million to LDK Solar on an interest free basis, with the loan to be repayable within 64 months unless first converted into shares in LDK Solar. The Initial HRX Promissory Note was sanctioned by the Grand Court on 23 June 2014 pursuant to the June 2014 Orders; and

 

  (iii) Receipt of two intercompany receivables owing from SPI to LDK Solar for US$7.8 million and US$3.2 million respectively.

 

14.10 Financing of the Onshore Entities

 

  (a) Certain of the Onshore Entities have taken out approximately US$2.9 billion in financing from the Onshore Banks. All of the Onshore Loans are governed by the laws of the PRC. Under these financing arrangements, virtually all of the onshore plants, properties, equipment and land use rights of the Onshore Group have been pledged to the Onshore Banks. Further information on the Onshore Loans is set out in the following paragraphs.

RMB Working Capital Facility

 

  (b) On 11 November 2013, Jiangxi LDK Solar, the holding company for a majority of the Onshore Operating Entities (with the exception of Jiangxi LDK Silicon and Jiangxi LDK Polysilicon), signed the RMB Working Capital Facility. The use of the proceeds of the RMB Working Capital Facility is strictly limited to financing the Onshore Operations within Jiangxi Province, PRC and may not be used to service any other existing indebtedness, whether onshore or offshore. The RMB Working Capital Facility terminates on 10 November 2016, and each loan under the RMB Working Capital Facility shall not have a maturity date later than such termination date. Each drawdown under the RMB Working Capital Facility will be made in the absolute discretion of the syndicate and will be subject to additional conditions (including early repayment) imposed by the syndicate on a draw-down specific basis. The syndicate has designated a working group to monitor the use of the funds and controlled bank accounts arrangements have been implemented.

 

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  (c) Under the RMB Working Capital Facility, Jiangxi LDK Solar granted a fixed and floating charge over certain fixed assets. In addition, the RMB Working Capital Facility is guaranteed by a number of Onshore Operating Entities, including LDK PV Xinyu, LDK Solar Nanchang, Jiangxi LDK Polysilicon, and Jiangxi LDK Silicon. Guarantees have also been granted by Mr Peng and his wife. Each of these guarantees are unsecured.

Historical Facilities

 

  (d) In addition to the RMB Working Capital Facility, various members of the Onshore Operating Entities entered into a number of facility agreements with certain Onshore Banks prior to the execution of the RMB Working Capital Facility (the “Historical Facilities”). These Historical Facilities total approximately US$2.9 billion. Under these Historical Facilities, a number of the Onshore Operating Entities entered into guarantee or security agreements with the Onshore Banks and financial institutions in connection with some of the loans, pursuant to which these Onshore Operating Entities have guaranteed all liabilities of the borrowers under these loans. These historical facilities include (amongst others):

 

  (i) Various other secured and unsecured short term working capital and trade financing provided to Jiangxi LDK Solar by a number of Onshore Banks up to an aggregate amount of approximately US$1.932 billion. Some of these loans have the benefit of the following guarantees and security:

 

  (A) Various guarantees granted by (amongst others) Jiangxi LDK Silicon, Jiangxi LDK Polysilicon Holding, LDK Solar Xinyu, LDK Solar Nanchang, LDK Solar Suzhou and LDK Solar Power Technology (Xinyu) Co., Ltd;

 

  (B) Personal guarantee from Mr Peng;

 

  (C) various fixed security over key buildings, land and equipment; and

 

  (D) accounts receivable pledge concerning a long term wafer contract with a key customer;

 

  (ii) Various working capital secured loans granted to Jiangxi LDK Silicon for an aggregate amount of approximately US$280 million by China Merchants Bank, CDB and Agricultural Bank of China. The following guarantees and securities were granted in connection with these loans:

 

  (A) Guarantee by LDK Silicon Holding, which is secured by a share pledge in favour of CDB over LDK Silicon Holding shares in Jiangxi LDK Silicon;

 

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  (B) Guarantee by Jiangxi LDK Silicon including a fixed asset pledge over certain items of equipment;

 

  (C) Guarantee by Jiangxi LDK Solar up to RMB 546.2 million;

 

  (D) Personal guarantee by Mr Peng;

 

  (iii) Various secured and unsecured trade & asset financing and working capital loans granted by a number of Onshore Banks in favour of LDK Solar Nanchang for an aggregated amount of approximately US$272 million. Some of these loans are secured over key buildings, land and equipment. A number of these loans were guaranteed by Jiangxi LDK Polysilicon Holding, Jiangxi LDK Solar, Jiangxi LDK Silicon and LDK Solar Xinyu and Mr. Peng;

 

  (iv) An unsecured working capital loan granted by Shanghai Pudong Development Bank- Hefei High- Tech branch in favour of LDK Anhui for an amount of approximately US$143 million;

 

  (v) A number secured working capital loans for an aggregate amount of approximately US$44 million, granted by a number of Onshore Banks in favour of LDK Solar Suzhou, which are all guaranteed by Jiangxi LDK Solar;

 

  (vi) A secured working capital loan granted by Minsheng Bank in favour of LDK Optronics for US$8 million, with a guarantee by Jiangxi LDK Solar; and

 

  (vii) A secured loan from CDB in favour of Taojiang New Energy for US$4 million, with a guarantee granted by Jiangxi LDK Solar. This loan is secured by an accounts receivable pledge.

 

14.11 The Intercompany Position

 

  (a) The Group has substantial intercompany receivable and payable balances owing between different entities within the Group. These intercompany balances arise from either trading relationships or internal financing requirements.

 

  (b) The intercompany balances, which relate to operational or financing activities and have accumulated over a number of years, can be broadly categorised into the following types of transactions:

 

  (i) Payment of trade obligations – where one subsidiary settles trade obligations on behalf of another subsidiary;

 

  (ii) Supply of inventory - relating to the purchase of module and/or materials from onshore subsidiaries for onward sale to third party customers outside of the PRC

 

  (iii) Financing – relating to the provision of funding required to support the continued operations of subsidiaries, or to facilitate the refinancing of financial obligations to third parties.

 

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  (c) The table below summarises the intercompany receivable and payable balances according to the management accounts of the Scheme Companies and LDK International (which acts as the primary treasury function between the Onshore Operations and Offshore Operations) as at 31 May 2014:

 

Company

   Receivables (US$)      Payables (US$)  

LDK Solar

     61,482,975         (785,880,544

LDK Silicon

     —           (16,401,866

LDK Silicon Holding

     174,089,132         (3,899,234

LDK International

     679,480,587         (899,807,638

Source: LDK Solar

 

  (d) In order to assess the validity and accuracy of the intercompany balances within the Group, the JPLs have undertaken a detailed reconciliation of the intercompany balances between Group entities based on management information as at 31 May 2014, the most recent accounting period available. As part of this exercise, the JPLs have sought to reconcile certain transactions, on a sample basis, to source documentation in order to test the quality of the Group’s internal management systems. The JPLs have also worked with management to understand and reconcile discrepancies between the accounting ledgers of different subsidiaries in order to reconcile various intercompany balances.

 

  (e) It should be noted that the analysis completed by the JPLs does not constitute an audit in accordance with Auditing Standards and cannot be relied upon to provide the same level of assurance.

 

  (f) With the exception of the claim asserted by Sunways whose Claim against LDK Solar will be released under the Schemes, the Intercompany Claims against either of the Scheme Companies will remain unimpaired under the Schemes. Once the Schemes have become effective, it is intended that LDK Solar will engage KPMG to carry out an analysis of the Group’s intercompany receivable and payable balances owing between the different entities within the Group. As part of the this process, KPMG will be tasked with working with management and the JPLs Scheme Supervisors to establish the most appropriate process (from both a tax and commercial perspective) to rationalise and otherwise clean up the Group’s intercompany receivable and payable balances.

 

14.12 Directors of the Scheme Companies

LDK Solar

 

  (a) LDK Solar’s Articles of Association provide that the LDK Board must consist of at least two directors.

 

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  (b) The directors of LDK Solar and their position within LDK Solar, as at the date of this Explanatory Statement, are as follows:

 

Name

  

Position

Mr Xingxue Tong    Director, Interim Chairman and President
Mr Zhibin Liu    Non-executive Director
Mr Xuezhi Liu    Non-executive Director
Mr Shi Chen    Non-executive Director