Debt holders of Energy Conversion Devices have formed an ad-hoc committee and hired legal and restructuring advisors, as the company faces the same pressures that led to the high-profile bankruptcy of Solyndra, said a source familiar with the matter.
Bondholders, who hold 70 percent of the company's debt, tapped Brown Rudnick as legal counsel and Duff & Phelps as financial advisors, the source told Reuters on condition of anonymity because he was not authorized to speak on the matter.
Energy Conversion, which makes lightweight, flexible solar laminates for rooftops and buildings, has not posted a profit since 2009. It reported a fourth-quarter net loss of $42.1 million, or 84 cents a share, while revenue fell 15 percent to $73.1 million.
The company has about $131 million in cash and about $263 million in convertible notes due 2013.
Attorneys for Brown Rudnick declined comment and Duff & Phelps was unavailable.
We regularly have conversations with our investors, said Michael Schostak, director of business development and communications for Energy Conversion Devices, adding the company does not comment on transactions or restructuring activity unless publicly announced.
Energy Conversion Devices' shares have plummeted since March, when it slashed production due to falling demand in Europe. Solyndra and other solar companies limped into bankruptcy after cash-strapped European governments cut subsidies for solar power projects.
They have also been struggling to compete with increasingly lower-priced Chinese-made solar panels.
SHADES OF SOLYNDRA
The mounting troubles for Energy Conversion Devices come on the heels of the Sept. 6 bankruptcy filing of Solyndra, which turned into a political embarrassment for U.S. President Barack Obama's administration, which had promoted that company as an example of how it planned to spur development in clean energy technology.
The case drew attention because Obama visited Solyndra before its collapse, and after the Department of Energy guaranteed a $535 million loan that the company has said may never be repaid in full.
Conversely, Energy Conversion Devices' Michigan headquarters hosted a visit by Obama's Republican predecessor, U.S. President George W. Bush, in Feb. 2006. Bush was on a two-day tri-state tour to highlight a package of energy initiatives from the then-president's state of the union address in 2006.
Energy Conversion Devices has not received any loan guarantees, but did get $13 million in federal manufacturing tax credits in 2010, according to Schostak.
One of its subsidiaries' Michigan manufacturing plants also hosted a visit in June 2009 by then U.S. Secretary of Commerce Gary Locke.
In August, the company said it would cut production costs by about a fifth as it struggled with high costs and low selling prices that have squeezed margins across the sector.
It seems difficult to envision a situation in which this company will not go into bankruptcy, said Morningstar Equity Research analyst Stephen Simko.
They have a little bit of a cash cushion but it's less than the amount of debt they owe, combined with the reality of the higher production costs.