Evergreen Solar Files Chapter 11 - Analyst Blog

Evergreen Solar Inc. (ESLR) announced that it had voluntarily filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The company has been on a slippery slope over the past two years.

Evergreen Solar faced with a market flooded with cheap Asian competition, continued to register losses. The company tried to stem the tide by relocating its manufacturing base from its high cost Massachusetts factory to Wuhan, China.

The USP for Evergreen Solar has always been its proprietary crystalline silicon technology known as String Ribbon, which uses approximately half the silicon for manufacturing wafers, compared to peers using the conventional sawing method. However, with the steep decline in silicon prices, the advantage gradually lost its shine. Lastly, the pain became worse for the company in recent times as key markets like Germany and Italy were gradually winding down their subsidy programs. 

Evergreen Solar filed the petition in the U.S. Bankruptcy Court for the District of Delaware. In conjunction with the Chapter 11 filing, Evergreen Solar stated that it entered into a restructuring support agreement with certain holders of more than 70% of the outstanding principal amount of its 13% Convertible Senior Secured Notes.

Under the restructuring, an entity formed by the note holders, ES Purchaser LLC, entered into an asset purchase agreement with Evergreen Solar. ES Purchaser will bid for the assets being sold under the Bankruptcy Code. If better offers for the assets are not obtained, ES Purchaser is expected to acquire most of the company's assets pursuant to the asset purchase agreement.

As part of Evergreen Solar's reorganization activities, the company will reduce its U.S. and European workforce by about 65 people, including suspension of operations at its Midland, Michigan filament facility.

However, it's Wuhan, China manufacturing facility is expected to continue depending on market demand. At the same time the company will engage in discussions with its investors in China regarding the fate of the facility and its sources of financing.

Evergreen Solar engages in the development, manufacturing and marketing of solar power products worldwide, including solar cells, panels and photovoltaic systems.

These modules are designed for a range of solar electric power applications, including water pumping, communications, outdoor lighting, rural electrification, recreational vehicles and stand-alone applications. The company sells its products through distributors, system integrators, and other value-added resellers. Its products are sold primarily in the U.S. and Europe.

Evergreen Solar currently has a short term Zacks #3 Rank (Hold) in line with peers like First Solar Inc. (FSLR) and Energy Conversion Devices Inc. (ENER). Over the longer run, we maintain our Underperform recommendation on Evergreen Solar shares.