On the same day the U.S. Department of Commerce launched AD and CVD probes into Far Eastern solar manufacturers, Martifer Solar USA submitted an application under Chapter 11 of the U.S. Bankruptcy Code to voluntarily initiate a reorganization process designed to protect and preserve the interests of its creditors and stakeholders.
Having failed to reach an agreed settlement with creditor Cathay Bank which is owed an estimated $6 million the U.S. subsidiary of Portugals Martifer Solar Inc. opted for bankruptcy proceedings that shield the company from insolvency.
During the hearing at the U.S. Bankruptcy Court in Las Vegas, Martifer Solar USA CEO Klaus Bernhart told the judge that he was confident the company could overcome its short-term financial difficulties if it becomes an end-to-end solar energy integrator a role that would require Martifer Solar USA to offer to find loans for solar project buyers, for example. Such an expanded service could, according to Bernhart, enable the company to accrue more funding and investment.
Martifer Solar USA's money woes have stemmed from what it says were "unrealistic" promises and timelines, delayed payment of bills from clients and delayed reimbursements from a federal government program designed to encourage more commercial solar development.
The company said that it has a pipeline of PV projects worth $280 million and was confident of turning its business around given initial creditor protection. According to court papers, as of November 30 last year Martifer Solar USA had $33.7 million in assets, of which $18.7 million was unpaid bills. Its debts at that time topped $35 million.
Bernhart admitted to the court that Martifer Solar USA's practice of hiring subcontractors and paying for all equipment upfront while agreeing to be paid by the client only once the project was completed had caused a shortfall in cash flow. He also revealed that unrealistic timelines offered to clients sometimes failing to take into account potential weather and supply chain delays meant that deadlines were often missed, and some former leaders would agree to pay their clients "liquidated damages" for delayed projects.
"Many of the solar projects consequently were destined to create losses for Martifer USA, and these losses were exacerbated by liquidated damages, and disputes were over when and whether projects were complete and monies owed to it," Bernharts court papers revealed.
Damaged by short-termism
Due to constantly firefighting a cycle of looming deadlines and disgruntled clients, Martifer USA allowed its project pipeline to dry up, said Bernhart. Having accrued more than 45 MW of installed PV under its belt, the companys revenue dropped to $16 million in 2013, down from a high of $71.3 million in 2011. As a result, more than half of its employees were laid off last year, with office closures in Denver and Connecticut further hindering its ability to hit deadlines and fulfill agreements.
However, Bernhart revealed to the court that Martifer USA has 14 projects in the pipeline with a combined capacity of 188 MW. This pipeline is thought to be worth an estimated $280 million for the company.
Despite this future promise, and having failed to resolve a financial dispute with Cathay Bank, Martifer Solar faced legal proceedings instigated by the bank earlier this week proceedings that have been delayed in the wake of the companys Chapter 11 bankruptcy filing.
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