On Friday, July 15, Evergreen Solar (ESLR) filed a Form 8-K with the SEC to announce that the company has suspended payment of $4.1M in interest on some of its debt. If interest remains unpaid for 30 days, the company will be considered in default. Creditors can take action against the company, including forcing it into bankruptcy in order to collect what they can on the money due.
In mid-May, ESLR announced its plans to pursue a restructuring of its debt to keep the company solvent. At the time, I expressed doubts that such efforts would succeed given ESLR’s dire financial condition, the massive dilution required of shareholders, and the on-going slowdown in the solar market. This latest announcement suggests that negotiations are not proceeding well and indicates that ESLR has taken one more step closer to bankruptcy. (For my archived commentary on ESLR, click here.)
Here is the text from the SEC filing (PDF):
On July 14, 2011, the Board of Directors of Evergreen Solar, Inc. (the “Company”) determined that in light of its current liquidity and capital resources, it will not make the interest payments due on July 15, 2011 to the holders of its 4.0% Senior Convertible Notes due 2013 (the “Senior Convertible Notes”) and its 4.0% Convertible Subordinated Additional Cash Notes due 2020 (the “Senior Subordinated Notes” and, collectively with the Senior Convertible Notes, the “Senior Notes”) under their respective indentures. The amount of interest due is $4,076,120 with respect to the Senior Convertible Notes and $90,444 with respect to the Senior Subordinated Notes. Under each indenture, the failure to pay interest, if continued for 30 days, will constitute an Event of Default. Accordingly, if the Company has not made these interest payments by August 15, 2011, U.S. Bank National Association, as Trustee of the Senior Notes, or the holders of at least 25% in principal amount of each class of the outstanding Senior Notes, will then have the right to provide an acceleration notice to the Company declaring the principal and unpaid interest on all the applicable Senior Notes due and payable.
The Company’s total outstanding obligations, including accrued but unpaid interest, as of July 15, 2011, under the indenture governing the Senior Convertible Notes are $207,882,120 and under the indenture governing the Senior Subordinated Notes are $5,590,444. In addition, if the Company fails to make these interest payments before the expiration of the grace period on August 15, 2011, the Senior Notes are accelerated and if such acceleration has not been rescinded within 30 calendar days, such events shall result in an event of default under the indenture governing its 13% Convertible Senior Secured Notes due 2015 (the “Senior Secured Notes”). This would then allow U.S. Bank National Association, as Trustee of the Senior Secured Notes, or the holders of at least 25% in principal amount of the outstanding Senior Secured Notes to provide an acceleration notice to the Company declaring the principal and unpaid interest on all the Senior Secured Notes due and payable. As of July 15, 2011, there was $170,362,500 outstanding under the indenture governing the Senior Secured Notes, including both principal and accrued but unpaid interest.
Be careful out there!
Disclosure: I am long ESLR.