Solar Firm Sungevity Hits Ch. 11 After Failed Buyout

Law360 Matt Chiappardi
March 14, 2017

Rooftop solar company Sungevity Inc. filed for Chapter 11 protection in Delaware late Monday, with private equity firm Northern Pacific Group and lender Hercules Capital putting in a stalking horse bid as the company seeks a sale following an earlier failed buyout.

In papers filed in the Delaware bankruptcy court, Sungevity listed nearly $170 million in debt and said it had a stalking horse deal in hand from an entity dubbed LSHC Solar Holdings LLC with a floor price consisting of a $50 million credit bid and assumption of certain liabilities.

The stalking horse, a joint venture of Northern Pacific and Hercules, is also putting up a $20 million debtor-in-possession financing package that will be part of its floor bid and allows $1 million of the loan to remain with the estate in cash if it turns out to be the winner of a planned bankruptcy auction, according to a first-day declaration by CEO Andrew Birch.

Sungevity had been on a path toward an acquisition by Boston private equity firm Easterly Capital in a $350 million deal that would have led to the solar company going public and accessing up to $200 million in capital to fund its growth plans.

The purchase price was reduced by $100 million in November, and a month later Easterly cancelled the deal, according to the declaration.

Sungevity found itself in a severe liquidity crisis and quickly pivoted to finding both short and long term solutions to its cash needs, “ Birch said in the declaration. As their funds dwindled, the debtors’ only other alternative was to immediately cease operations, lay off their remaining employees and turn the keys to the business over to their prepetition secured lenders. “

The employee layoffs led to an adversary action in the case filed by former Sungevity employee … on Tuesday, who claimed the debtor violated the U.S. Worker Adjustment and Retraining Notification Act by terminating its workforce without the required 60-day notice.

Sungevity listed debts that include $55 million owed to Hercules on term and revolving loans, $15 million to MMA Energy Capital LLC due either upon an initial public offering or in September and a $9.5 million bridge loan the debtor sought from a consortium administered by Wilmington Savings Fund Society FSB after the Easterly deal fell through to help fund operations in the interim.

The company also listed a $32 million loan from Atalaya Special Opportunities Fund VI LP secured by Sungevity’s equity interest in nondebtor subsidiary Sungevity Short Hills LLC, $34.1 million in convertible notes and $22.8 million in unsecured trade debt.

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The case has been assigned to U.S. Bankruptcy Judge Laurie Selber Silverstein, who has scheduled a first-day hearing in Delaware for Wednesday.

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[The Plaintiffs] is represented by Christopher D. Loizides of Loizides PA and Jack A. Raisner and René S. Roupinian of Outten & Golden LLP.