Evergreen Solar Files for Chapter 11 Reorganization

August 15, 2011 by Jeff Shepard

Evergreen Solar, Inc. announced that it had voluntarily filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in the U.S. Bankruptcy Court for the District of Delaware.

In conjunction with the Chapter 11 filing, the company 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, or the supporting noteholders. Pursuant to the restructuring support 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 Ribbonâ„¢ wafer technology business assets. As part of the bankruptcy process the company will undertake a marketing process and will permit all parties to bid on its assets, as a whole or in groups pursuant to section 363 of the Bankruptcy Code. The supporting noteholders have agreed to support the company’s restructuring by consenting to cash collateral usage pursuant to a budget during the sale process; and to support the costs of the Bankruptcy Case, including court approval of a plan of reorganization subsequent to the sale process.

As part of the restructuring, an entity formed by the supporting noteholders, ES Purchaser, LLC, entered into an asset purchase agreement with the company. ES Purchaser will serve as a "stalking-horse" and provide a "credit-bid" pursuant to the Bankruptcy Code for assets being sold. If higher or better offers for assets are not obtained, it is expected that most of the company’s assets will be acquired by ES Purchaser pursuant to the asset purchase agreement. The asset purchase agreement for the 363 sale is subject to Bankruptcy Court approval and other customary closing conditions. The company has the requisite funding in hand to operate in Chapter 11 and will continue to operate but with additional operational changes necessary to continue to reduce expenses.

"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," said Michael El-Hillow, the company’s President and Chief Executive Officer.

"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," El-Hillow added.

As part of Evergreen Solar’s reorganization activities, the company will reduce its United States and European workforce by about 65 people, including suspension of operations at its Midland, Michigan filament facility, and will have 50 people supporting development, 10 people in administration as well as 25 people supporting industry standard wafer development in Wuhan, China. The company’s 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.

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.