LDK Solar (NYSE: LDK) on Thursday priced $400 million of convertible notes and said it expects to close the offering Tuesday.


The company last week said it needed $200 million to $300 million in capital and on Tuesday said it would issue $300 million in convertible notes to help build its silicon plant and expand its wafer production (see LDK Seeks Big-Time Capital and LDK Wants $300M).

LDK didn't immediately respond to calls asking why it had decided to raise an extra $100 million.

But the announcement said LDK would use the cash to buy back approximately $200 million of its American depositary shares, up from a plan to repurchase $150 million worth of shares that was announced Tuesday. LDK also said it still plans to spend 75 percent of the remaining cash to help build its polysilicon factory -- expected to have the capacity to produce 15,000 tons per year -- 20 percent to expand its wafer production and 5 percent for other "general corporate activities." 

"The company tries to overdeliver on everything it does, which is why the deal was higher than the size stated a few days earlier (and, frankly, terms of these deals are open to swings until the very end)," wrote Hakan Telenius, organizer of the LDK Investor Group, in the group's newsletter Thursday. "Good for LDK - this is a deal of strength that in all likelihood offers LDK a lot of flexibility in how it decides to pay back the debt. … I for one think the amount raised it just right based on the needs and the current valuation on the company."

He added that the question remains whether the market will think the $400 million is sufficient for LDK's needs. "Whatever the market reaction to this, my guess is that this will be enough for the rest of 2008 for sure, and that the company would only raise more if they were not able to deliver on 2009 numbers," he wrote.

Sill, some shareholders are likely to be concerned about dilution. In the newsletter, Telenius wrote that the group doesn't know when and how a conversion (and the accompanying dilution for shareholders) can take place, "except that the company says it is not at the current price."

LDK priced the convertible notes at 25.4534 American depositary shares per $1,000 of notes, equivalent to approximately $39.29 per share. That's about 25 percent more than the closing price of $31.43 per share Wednesday.

The notes will pay cash interest semiannually at a rate of 4.75 percent per year, according to LDK's announcement.

Shares grew 2.6 percent to $32.24 per share Thursday, after falling 5.2 percent Wednesday. The stock is 58 percent off its peak of $76.75 per share in September, before the company faced allegations that it overstated its silicon inventories.

An independent audit found the company had made "no material errors" in December and on Monday, LDK said the U.S. Securities and Exchange Commission staff, which had been inquiring into the allegations in October, had decided not to recommend enforcement action against the company (see Independent LDK Audit Finds 'No Material Errors', SEC Ends Investigation of LDK and LDK Says SEC Is Inquiring Into Inventory Discrepancy Allegations).