Energy Conversion Devices Inc Announces Bankruptcy
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PRESS RELEASE - Energy Conversion Devices Inc Enters Bankruptcy
Ailing Energy Conversion Devices Inc. said Tuesday it has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court Eastern District of Michigan and hopes to sell its United Solar Ovonic subsidiary and other assets.
"What would happen to Energy Conversion Devices is that it would be wound down," said spokesman Michael Schostak. "It's essentially a break-up of the company."
A bankruptcy filing was predicted by several analysts, who were concerned the Auburn Hills-based solar products manufacturer would not be able to make a June 2013 payment, totaling more than $263 million, which will be due on notes.
ECD in November halted production at its United Solar Ovonic plants because it had too much inventory. It furloughed 400 manufacturing workers and had planned to lay off another 500 employees by the end of last year.
The company lost $306.4 million last fiscal year that ended June 30, 2011, and hasn't turned a profit since early 2009. The great majority of its losses in the past two years have come from its United Solar Ovonic unit, according to ECD's annual earnings reports.
"In the last month or two, it's become apparent that again to attract the capital we need to grow the business and give us the maneuverability and flexibility to operate the business, we needed to have a clean financial slate," Schostak said.
The news sent Energy Conversion Devices' stock plummeting Tuesday morning, falling 79 percent from Monday's close to 30 cents a share on the Nasdaq at 11:30 a.m. Since the beginning of the year, the stock price had rallied from 20 cents a share on Jan. 3 to $1.46 at Monday's close.
ECD said its United Solar subsidiary also filed Tuesday for Chapter 11 bankruptcy. Investment banking firm Quarton Partners LLC has been hired to manage the sale process of United Solar, which is expected to be completed within 90 days, according to a news release.
"We firmly believe there is a strong and sustainable commercial market for Uni-Solar products. USO's next-generation, 12 percent efficient, flexible photovoltaic products build upon 25 years of PV experience and enable highly competitive production costs with a fundamentally differentiated product. 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," said Julian Hawkins, Energy Conversion Devices' president and CEO, in a statement.
"The processes we initiated today will afford greater opportunity for ECD to maximize value for its stakeholders and conduct an orderly sale of USO to ensure it is viable and successful for the long-run."
Morningstar Inc. analyst Stephen Simko, who has expected the company to file bankruptcy, said Tuesday he doesn't anticipate the sale of United Solar to generate much interest given the company's cost structure compared with that of competitors and poor profitability.
"This is going to be a pennies-on-the-dollar kind of sale," he said.
Schostak said ECD opted for a Chapter 11 vs. a Chapter 7 liquidation so it could continue to operate the business, remain the debtor in possession and let management work to find solutions.
On Monday, Energy Conversion Devices sold its Ovonic Battery Co. Inc. subsidiary to BASF Corp. for $58 million cash, before fees. All 35 employees of the subsidiary have been hired by BASF as part of the transaction, Schostak said.
Energy Conversion Devices and United Solar have about 750 employees today, including the 400 workers who remain on furlough. About 60 percent of the employees are in Michigan, Schostak said.
The company also said Tuesday it will not file its quarterly report for the three months ending Dec. 31, but Schostak said the company posted a "substantial loss" for the period.
The company also will look to sell off its about 40 percent stake in Ovonyx Inc., a memory technology business, and other intellectual property, Schostak said.