JPMorgan, Centerbridge Get Distressed-Debt Help From Tariffs

(Bloomberg) -- The biggest winners of President Donald Trump’s decision to slap tariffs on imported solar equipment may not be American manufacturers but a group of investment houses around the globe.

The firms -- from Centerbridge Partners LP to JPMorgan Chase & Co. -- all are creditors to the two struggling solar companies that brought the trade complaint. The value of their investments, mostly in the form of distressed bonds, is likely to get a boost as the new tariffs help American manufacturers. While much of the U.S. solar industry has blasted the tariffs, warning of massive job losses, these investors show at least some on Wall Street stand to gain.

Centerbridge, a New York firm that manages $14 billion in credit and distressed assets, is among the biggest creditors to solar manufacturer SolarWorld AG, a German company that owns SolarWorld Americas. Centerbridge controls about a third of the parent company’s senior secured notes, according to people familiar with the matter. SolarWorld AG filed for bankruptcy in May. 

SolarWorld Americas, which has a plant in Hillsboro, Oregon, was a leader of the tariff campaign. 

Spokespeople for Centerbridge and JPMorgan declined to comment. SolarWorld didn’t return messages seeking comment.

Another winner may be SQN Capital Management, a little-known Wall Street lender that gambled on solar and ended up helping finance the tariff push. It made a $50 million loan to Georgia solar-maker Suniva Inc., a Chinese-owned company that filed for bankruptcy in April. Suniva initiated the tariff drive. A spokesman didn’t immediately respond.

Jeremiah Silkowski, SQN’s chief executive officer, dismissed complaints by some U.S. solar executives that the drive for tariffs was really a bail-out for Wall Street and not an effort to save manufacturing jobs. Most solar companies in the $28 billion U.S. market opposed the levy, contending it could drive up prices and obliterate more than 20,000 industry jobs.

“We are not in this as a hedge fund looking to make a killing, but the market is distorted and this was our only appropriate action,” Silkowski said in an interview. “We are the ones trying to protect U.S. manufacturing jobs. We are the ones trying to protect U.S. energy independence.”

Other firms that are creditors to SolarWorld include Marathon Asset Management LP and Bank of America’s Merrill Lynch International, according to an insolvency-related document. Spokespeople for Bank of America and Marathon declined to comment.

The investors in Suniva and SolarWorld Americas could also benefit if the two companies end up being sold. The sale of SolarWorld Americas has been specifically pegged to Trump’s decision. More than a dozen entities have expressed interest. Suniva has also received multiple expressions of interest.

Creditors including Centerbridge could gain further from a long-discussed global deal that would settle several solar-trade disputes. Such a settlement -- a long-shot -- could include divvying up an estimated $1.5 billion in already-collected tariffs held by the U.S. government.

In a statement Monday after Trump’s announcement, a Suniva spokesman said the manufacturer looked forward to “beginning global settlement negotiations.”

Even with tariffs, a U.S. manufacturing revival isn’t likely. China is the clear market leader, home to fertile tech communities that manufacture and assemble solar panels, dragging prices down for solar modules -- and helping spur a global clean-power boom. Its dominance probably isn’t replicable “in any location because many market conditions changed,” according to a report from the U.S. government’s National Renewable Energy Laboratory.

The tariffs “may be about boosting the value of the assets before liquidating them,” said Hugh Bromley, an analyst at Bloomberg New Energy Finance.

©2018 Bloomberg L.P.

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