Only hours after PV-Tech reported that Evergreen Solar had said it was in detailed and time-consuming negotiations with holders of its 13% Convertible Senior Secured Notes due 2015, which had caused the company to delay quarterly SEC filings, the company has said it has filed for voluntarily bankruptcy, under US Chapter 11 bankruptcy codes. At the same time Evergreen Solar said that it had made agreements with certain noteholders with more than 70% the outstanding debt to sell its ‘String Ribbon’ wafer technology business assets. A ‘stalking-horse’ bidding process has been agreed.
“Since January, Evergreen Solar has been aggressively repositioning itself to fully leverage the potential our String Ribbon wafers can bring to high-volume solar cell and module manufacturers, as these customers are facing severe pressure to further reduce their total cost of manufacturing and particularly their wafer supply costs. The actions we are taking today enable the continued development of an industry-standard wafer using Evergreen’s differentiated technology and thereby provide the lowest cost wafer to the growing solar industry,” stated Michael El-Hillow, president/CEO of Evergreen Solar.
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“Chapter 11 will provide Evergreen Solar with the ability to maximize returns for our stakeholders through the proposed sale process. Importantly, we expect to continue our technology development without interruption during Chapter 11 and the sale process. Day-to-day operations will go on as usual as employees carry out their responsibilities, and we will continue to pay our suppliers and vendors for goods and services received during this period,” he added.
Due to the debt levels Evergreen is trading under compared to its real assets, the deal with ‘certain’ noteholders means that few creditors and shareholders, if any, will see a return of investor funds. Indeed the company noted that common stock would be ‘extinguished upon consummation of the Chapter 11 plan.’
Based on the initial wording of the press release, it remains unclear at this juncture whether there is actually any plan or future for Evergreen Solar. As is sometimes the case, a company can emerge from Chapter 11 and restart operations. However, the potential sale of its core IP suggests at the moment that this is a desperate attempt to salvage millions of dollars for noteholders that have legal priority of monetary returns at the expense of business suppliers and shareholders.
Key noteholders are supporting the sale of Evergreen's IP regarding String Ribbon technology with financial costs associated with any sale, further supporting a ‘fire sale’ decision.
Indeed, certain key noteholders have formed a company, called ES Purchaser LLC, which will serve as a “stalking-horse” and provide a “credit-bid” in accord with the Bankruptcy Code for Evergreen's IP and other assets being sold. This means that should a bid fall below noteholders' agreed valuation, ES Purchaser would become the owner of the assets. However, the asset-purchase agreement for the sale is subject to Bankruptcy Court approval and other customary closing conditions.
As PV-Tech had previously highlighted, Evergreen Solar was close to bankruptcy, having failed to secure alternative forms of funds and combined with ongoing heavy losses, its share price had fallen below listing on the Nasdaq stock exchange and was threatened with delisting.
In an SEC filing, Evergreen Solar noted that in connection with the bankruptcy proceedings, it expected to incur fees in the range of US$14.0 million to US$17.5 million.