Troubled Spanish PV group Isofotón announced on Thursday that it would file for restructuring proceedings on June 4 to manage a growing mountain of debt.
The Málaga-based company has been slapped with a $96 million lawsuit by U.S. polysilicon manufacturer Hemlock related to a contract signed with its previous management. In addition, Isofotón said banks had declined to refinance the groups growing debt.
While all signs point to a possible insolvency for the company, the group said business activities would continue as usual, stressing that it remained committed to its partners and clients.
The decision to seek legal proceedings was made after banks refused to refinance the companys debt as well as "unforeseen debts resulting from pre-2010 management decisions," including the Hemlock lawsuit, and in view of the current state of the PV market, the company said in a statement.
"Isofotón Spain is firmly committed to closing an agreement with its creditors that will ensure the safeguarding of the rights and interests of its workers, creditors and shareholders, while ensuring the viability of its business," it added.
The company, which has factories in Málaga and in the U.S. state of Ohio, will file for restructuring proceedings at the Mercantile Court of Málaga.
Isofotón said the "unforeseen contingencies inherited from management decisions," made before current owner Affirma Group acquired the company in June 2010, would impact its previously proposed viability plan.
According to the company, the previous management signed a 10-year take-or-pay contract signed in 2005 with U.S. polysilicon manufacturer Hemlock "when the price of polysilicon was very high."
One of the contract clauses made Isofotón Spain the guarantor of Hemlock for one-third of the debt of Global Sun Ltd, an intermediary company headquartered in Malta. Hemlock filed the $96 million lawsuit in May with the Court of Michigan to cover a non-payment of Global Sun.
As part of the agreement between Isofotón and Hemlock, the U.S. company supplied polysilicon to Global Sun, which in turn supplied polysilicon wafers to Silicio Solar, which supplied PV cells to Isofotón Spain to develop its panels.
Adding to its troubles is the fact that Isofotón Spain, under its previous management, received and invested three government subsidies of unspecified amount before Affirma took majority ownership of the group in June 2010. The government is now demanding the return of those subsidies.
Isofotón said it was also in the process of downsizing its operations in Málaga in order to ensure the factorys future viability and its key position as the companys global R&D center, a move that will affect 360 workers.
Isofotón has a wide range of projects in key markets around the globe, including Latin America, Japan and Saudi Arabia.
"This is a tough restructuring plan but is in line with those being implemented by other companies in the sector and is necessary to strengthen the business," the company said.