ECD announces insolvency15. February 2012 | Industry & Suppliers, Markets & Trends | By: Becky Stuart
Just months after suspending its manufacturing operations and announcing significant job cuts, Energy Conversion Devices (ECD) and a number of its subsidiaries, have filed for Chapter 11 bankruptcy.
In May, the U.S. renewable energy company announced a restructuring plan, in response to "challenging" solar market conditions. It then temporarily suspended all its manufacturing operations in November "as an inventory control measure". As a result, 400 employees were given a temporary leave of absence and a further 500 full time employees were let go.
Under its latest move, which saw ECD voluntarily filing a petition for relief under Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Michigan, the company has said it is seeking to sell, among other assets, its wholly-owned operating subsidiary, United Solar Ovonic LLC (USO), and its minority stake in Ovonyx, Inc.
In a statement released, it added, "The company has received support for its operating and divestiture plan pursuant to a formal Plan Support Agreement executed by the company with holders of approximately 70 percent of the company's $263.2 million in outstanding three percent Convertible Senior Notes due 2013."
While it has been said USO, a manufacturer of flexible photovoltaic cells, will continue to operate during the sale process, it has also filed for relief under Chapter 11. "We firmly believe there is a strong and sustainable commercial market for Uni-Solar products," stated Julian Hawkins, ECD president and CEO. "However, our current capital structure and legacy costs are preventing USO from making the investments necessary for the future of the business without restructuring through the bankruptcy process."
Investment banking firm Quarton Partners, LLC has been brought on board to manage the sale process, which is expected to be completed in 90 days.
A further ECD subsidiary, engineering, procurement and construction company, Solar Integrated Technologies, Inc. (SIT) has additionally voluntarily filed a petition for relief under Chapter 7. "As a result of this filing," said ECD in the statement, "SIT and its European subsidiary, Solar Integrated Technologies GmbH, will continue to operate, though separately from ECD and USO, during the disposition of the SIT proceeding."
In terms of its other assets, ECD says it sold its majority owned subsidiary, Ovonic Battery Company, Inc. to BASF Corporation for the gross purchase price of US$58 million, on February 13.
In announcing the insolvency news, ECD cited poor financial performance. For the first fiscal quarter of 2012, the company achieved consolidated revenues of around $20 million and shipped approximately 11 megawatts of products.
"[ECD] continued to operate at unsustainable levels, resulting in substantial losses and a continued decline in cash balances," it explained, adding, "The company has determined that its current financial position is insufficient to sustain the current operating environment and make the necessary investments for the future of the business, without restructuring through the bankruptcy process. However, current cash is anticipated to be sufficient for expected operations during the Chapter 11 proceeding, and therefore the company is not expected to require third-party debtor-in-possession financing."
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