TEXT-S&P drops GCL-Poly ratings at the company's request

(The following statement was released by the rating agency)

Feb 03 - Standard & Poor's Ratings Services said today that it had revised its outlook on GCL-Poly Energy Holdings Ltd. to negative from stable. At the same time, we affirmed our 'BB+' long-term corporate credit rating on the China-based manufacturer of solar polysilicon and solar wafer. We also lowered our Greater China credit scale rating on the company to 'cnBBB' from 'cnBBB+'. We then withdrew all the ratings at the company's request.

The outlook revision before the withdrawal mainly reflected our view that GCL-Poly would continue to face heightened industry risk in 2012. The global photovoltaic industry has been in severe downturn since the second quarter of 2011 due to weak demand and oversupply. The average selling price (ASP) of photovoltaic products has therefore fallen drastically. The ASP has stabilized in the past few weeks. Nevertheless, we have limited visibility over the likelihood of a recovery due to an uncertain global economic outlook.

We expect excessive capacity globally, ongoing subsidy cutbacks in major solar markets, a weak project financing environment, and the likelihood of a heightening trade dispute between China and the U.S. to continue to trouble the global photovoltaic industry in 2012. We estimate that GCL-Poly's gross margin would weaken significantly and its profitability would be under pressure in 2012 if the ASP remains soft. We expect GCL-Poly's gross margin to fall below 30% in 2012 from 37% in 2010.

The rating affirmation reflected our view that GCL-Poly's strong cost competitiveness would enable the company to continue to make a profit while most of its peers could incur losses amid a difficult operating environment. GCL-Poly is one of the few polysilicon producers that were able to produce at costs lower than the spot market price in the past few months.

RELATED CRITERIA AND RESEARCH

-- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

-- Key Credit Factors: Methodology And Assumptions On Risks In The Photovoltaic Solar Panel Manufacturing Industry, Oct. 27, 2009

-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009

-- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008

-- Corporate Ratings Criteria 2008, April 15, 2008