(This is a partial excerpt from an article I published on Seeking Alpha. Click here to read the entire piece.)
When Evergreen Solar (ESLR) issued a dire earnings warning, I speculated that the company is flirting with bankruptcy. Tonight, ESLR reported quarterly earnings for the quarter ending April 2, 2011 and confirmed that it is indeed scrambling to avoid bankruptcy. ESLR is not holding a conference call to discuss its latest results because it is in “…ongoing discussions and negotiations with certain noteholders.” The company recommended investors review the 10-Q to get the dirty details about the company’s chances to remain solvent and viable. So, I did. And boy do things look dire…
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…If ESLR can restructure its debt, and this appears to be a BIG if, ESLR will force massive dilution on its shareholders:
“The Company can make no assurances that it will be able to successfully restructure its debt, but its current expectation is that, in order to significantly deleverage its balance sheet, any restructuring will involve very significant dilution to the Company’s existing stockholders, leaving them with at most a very small percentage of the Company’s outstanding common stock.”
And if ESLR cannot restructure? Then bankruptcy:
“If the Company does not complete a restructuring of its outstanding indebtedness prior to the time that it runs out of cash or is required to offer to purchase its outstanding convertible notes following a ‘fundamental change,’ or an event of default resulting in acceleration otherwise occurs under the indentures for its outstanding convertible notes, the Company will not have the cash on hand to make the payments required by the governing indentures and may be forced to declare bankruptcy.”
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*Chart created using TeleChart:
(This is a partial excerpt from an article I published on Seeking Alpha. Click here to read the entire piece.)
Be careful out there!
Full disclosure: long ESLR