Solar Losers: Evergreen Solar on the Brink

NEW YORK ( TheStreet) -- Embattled U.S. solar company Evergreen Solar ( ESLR) announced after the close on Thursday that it is being forced to seek financial restructuring alternatives that could include a bankruptcy filing and significant dilution to existing shareholders. The company pulled out of its regularly scheduled quarterly conference call with analysts, scheduled for Friday morning, in announcing its earnings after the close.

"In light of ongoing discussions and negotiations with certain noteholders, the Company has canceled the previously scheduled conference call," Evergreen said in a press release.

"This is the bond holders taking over. Equity holders will be wiped out and bondholders will get pennies," said Wunderlich Securities analyst Theodore O'Neill.

Evergreen has been on financial life support for several quarters and bondholders had rejected a plan to convert existing debt securities to a new structure in January, leaving Evergreen's finances in limbo.

Evergreen shares declined by 15% after the market close on Thursday to $1.20.

Evergreen Solar cash and cash equivalents, including restricted cash, as of April 2, 2011, were approximately $38.5 million and were approximately $33 million at April 30, 2011, after making a scheduled interest payment of $10.75 million on April 15, 2011 to holders of the Company's 13% Convertible Senior Secured Notes due 2015.

Evergreen Solar said in the release, "the Company's near-term liquidity has been negatively impacted as a result of its low year-to-date sales volume and potentially slower sales for the remainder of this year combined with expected increased pricing pressure. Furthermore, cash to be realized through the reduction in accounts receivable and inventory from the recently closed Devens facility will be less than previously expected and will take longer than expected to realize. Accordingly, the Company believes it will need to secure additional sources of cash sooner than expected and has retained financial and legal advisors to actively evaluate restructuring alternatives."

Evergreen announced its quarterly results in the release, but the solar company's existential crisis is the larger issue. The solar company lost 70 cents per share, versus an average analyst estimate of a 55 cent loss.

First quarter revenues was $35.3 million, down 60.4% sequentially compared to fourth quarter of 2010 revenues of $89.3 million, and below the analyst estimate for revenue of $52 million. Shipments for the first quarter of 2011 were approximately 17.8 megawatts, compared to fourth quarter of 2010 shipments of 46.6 megawatts. Average selling price for the first quarter of 2011 was $1.86 per watt, down approximately 2% from $1.90 per watt recorded in the fourth quarter of 2010.

First-quarter weakness has hit even the best, lowest-cost companies in the solar sector. China's leading low-cost solar module vendors, Trina Solar ( TSL) and Yingli Solar ( YGE), pre-reported that first quarter shipments would be lower than expected this week.

First Solar ( FSLR) reported earnings highlighting all of the risks in the solar market, saying the second quarter in particular would be difficult, but having the confidence to stick with its full-year guidance.

Evergreen Solar gross margin for the first quarter of 2011 was -62.5% compared to -84% in the fourth quarter of 2010. Gross margin in both the fourth quarter of last year and first quarter of this year has been hit by the company's decision to cloe its Devens, Massachusetts manufacturing facility.

The larger write-down came in the fourth quarter, leading to the positive comparison for first quarter numbers, including an operating loss for the first quarter of 2011 at $46.2 million, compared to $399.1 million for the fourth quarter of 2010. Net loss for the first quarter of 2011 was $33.4 million compared to $411.0 million in the fourth quarter of 2010.

Evergreen Solar said it will continue to "aggressively pursue opportunities to address its capital structure in the near term." However, Evergreen said it "can make no assurances that it will be able to successfully restructure its debt ... 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."

-- Written by Eric Rosenbaum from New York.

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