Sometimes having the first-mover advantage doesn’t pay off.  If Evergreen Solar, Inc. (NASDAQ: ESLR) was not the first pure-play solar stock in America, it was among the first.  Now it is filing for Chapter 11 bankruptcy protection.  What a difference a decade can make.

The manufacturer of String Ribbon solar power products announced on Monday that it has now voluntarily filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware.

Evergreen has now entered into “a restructuring support agreement with certain holders of more than 70% of the outstanding principal amount of the Company’s 13% Convertible Senior Secured Notes.”  Under this agreement, the supporting noteholders have agreed, “subject to certain terms and conditions, to implement the restructuring to be effected through one or more sales of certain of the company’s assets pursuant to section 363 of the Bankruptcy Code, including the Company’s String Ribbon™ wafer technology business assets.”

Under the restructuring process it plans to use a marketing process to attract bids from all bidders either as a whole or in groups.  The supporting noteholders have agreed to support the restructuring by consenting to cash collateral usage pursuant to a budget during the sale process; and to support the costs of the bankruptcy case.

ES Purchaser, LLC, an entity formed by the supporting noteholders, has also entered into an asset purchase agreement with Evergreen Solar as a stalking-horse and it will provide a credit-bid for assets being sold.

The release notes the same fear as you see with most Chapter 11 reorganizations.  The common shareholders could face a total wipeout.  The release noted that if a better offer (or offers) does not come then most Evergreen assets will be acquired by ES Purchaser.

The added trouble today is that customers are seeing continued pressure to keep cutting manufacturing and wafer supply costs.

The company claims that it expects to continue with its technology development without interruption during this Chapter 11 and sale process and it further noted that daily operations and regular payment to suppliers and vendors will continue.  That should read “sort of” because the company is also announcing that the U.S. and European workforce is being cut by 65 people.  It is suspending operations at the Midland, Michigan filament facility.  The company will have about 50 people supporting development, 10 people in administration, and about 25 people supporting wafer development in Wuhan, China.  Evergreen even went on to note, “the Wuhan China manufacturing business is expected to continue depending on market demand while the Company engages in discussions with its investors in China regarding possible changes to that operation and its sources of financing, including the possibility of transitioning its operations to the Company’s new industry standard wafer technology.”

Here is the kicker and here is where the common holders will get the traditional boot in the process: “Based upon the estimated value of the Company’s assets, the assets are expected to be insufficient to satisfy all its obligations to its creditors. Accordingly, it is expected that no distributions will be made to holders of common stock and the common stock will be extinguished upon consummation of the Chapter 11 plan.“

In short, Evergreen as a stock is dead.  Sadly, Evergreen won’t likely be the last bankruptcy or reorganization under Chapter 11.

Shares are down 32% at $0.286 currently on more than 3.3 million shares.

JON C. OGG

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