Struggling solar equipment maker LDK Solar announced late on Monday that it had sold a stake amounting to 19.9 percent of its outstanding shares to local government-backed Heng Rui Xin Energy, to help ease its financial problems.

HRX will hold a 16.6 percent stake in LDK Solar after dilution. It will buy the new shares at 86 cents each, a premium of 21 percent on the stock's closing price of 71 cents on Friday. This investment will cost around $23 million based on 133.5 million outstanding shares.

HRX is 60 percent owned by Hi-tech Wealth Investment and Developing Co Ltd and 40 percent by Xinyu State-owned Asset Management Co Ltd.

LDK Solar, established in 2005, was the first company in Xinyu, a city in eastern China's Jiangxi province, to be listed on the New York Stock Exchange. It employs more than 20,000 people and paid 1.3 billion yuan ($203.97 million) in taxes in 2011, almost 12 percent of the city's total fiscal revenues.

LDK Solar had sales revenues of 13.93 billion yuan and suffered a net loss of 5.49 billion yuan in 2011, according to its annual report. Its total debt amounted to 30.23 billion yuan by the end of 2011.

Its share price kept falling this year, as China's solar industry faced a market glut and trade barriers in the United States and Europe.

The company has reported a loss for the last five quarters, raising fears that it may be forced to borrow more in the absence of a positive cash flow.

In July, the authorities in Xinyu decided to repay 500 million yuan ($79 million) in loans extended to LDK Solar by Huarong International Trust and Investment Corp.