U.S. affiliates of China-based solar equipment maker SunTech Power Holdings on Jan. 12 filed for chapter 11 protection at the U.S. Bankruptcy Court for the District of Delaware.
Robert Moon, the Chief Restructuring Officer (CRO) of the Suntech Group, which includes Suntech America and Suntech Arizona, filed first-day testimony with the court about the companies and why they had to seek bankruptcy protection.
Suntech Power Holdings, a Cayman Island exempted company, is the ultimate parent of the Suntech Group. Suntech Holdings was delisted from the New York Stock Exchange in February 2014 and, subsequently, was placed on the over the counter exchange. Historically, the operating subsidiaries in the Suntech Group developed, manufactured, and marketed photovoltaic (PV) modules and cells and provided PV system integration services to customers around the world. The Suntech Group sold its solar products for residential, commercial, industrial, and utility applications throughout the Americas, Europe, Asia and the Middle East.
Suntech America is wholly owned by Suntech ES Holdings Inc. and is based in San Francisco, California. Historically, Suntech America was the main operating subsidiary of the Suntech Group in the Americas and its primary business purpose was acting as an intermediary for marketing, selling and distributing Suntech Group-manufactured products. Suntech America’s primary tangible assets consist of unencumbered cash in the amount of approximately $10m, and inventory, consisting of PV modules, with a book value of approximately $6.5m.
Suntech America’s books and records also reflect accounts receivables in the amount of approximately $110m, which primarily consist of recorded intercompany obligations due to Suntech America from other members of the Suntech Group. Suntech America owns no real property and presently leases office space in San Francisco. Suntech America is currently in the process of monetizing its remaining PV module inventory using a commission-based sales force.
Suntech Arizona is also directly owned by Suntech ES and is based in Goodyear, Arizona. Suntech Arizona owns no real property and leases a manufacturing facility in Goodyear. Prior to ceasing production in April 2013, the Goodyear Facility manufactured PV modules that it sold to Suntech America. While Suntech Arizona does not own the Goodyear Facility, it does own the manufacturing equipment housed at that facility. Other than this manufacturing equipment, Suntech Arizona owns no other significant tangible assets.
Suntech Arizona’s books and records also reflect intercompany accounts receivable (resulting from Suntech America’s purchase of PV modules) in the amount of approximately $52.3m. Suntech America has been paying down this receivable and Suntech Arizona has been using such amounts to fund its limited lease and utility obligations. Suntech Arizona has recently entered into an asset purchase agreement for the sale of its manufacturing equipment and will be seeking the bankruptcy court’s approval to move forward with the transaction.
Moon said these chapter 11 cases are the result, in large part, of: the Suntech Group’s international restructuring efforts which, on a macroeconomic level, were the result of dramatic changes in the solar panel industry and, on a microeconomic level, a contested sale of Chinese assets called the “Wuxi Sale”; as it relates to the debtors specifically, fundamental changes in the United States regulation of importation of foreign solar panels; and various litigation matters that have been a drain on the debtors.
Moon wrote: “The Chapter 11 cases are necessary at this juncture for the Suntech Group to continue to progress towards finalizing their international restructuring. As noted above, the Suntech Group already is, or has been, subject to insolvency proceedings in China, Europe, the Cayman Islands and the British Virgin Islands, and now is in a position to focus on expeditiously and efficiently resolving its affairs in the United States. These Chapter 11 cases will afford the Debtors and the Suntech Group that opportunity by (i) providing the Debtors with a necessary breathing spell from the various litigation and creditor matters they face and (ii) allowing the Suntech Group to maximize the value of its remaining U.S.-based assets in an efficient and market-tested manner and, if sufficient funds exist following satisfaction of allowed claims, to distribute any remaining funds to members of the Suntech Group in their capacity as the Debtors’ equity holders.”
Moon added: “In an effort to finalize these Chapter 11 cases and to continue progressing the Suntech Group’s international restructuring efforts as expeditiously as possible, the Debtors intend to file a disclosure statement and plan of liquidation in the near term. In my view, through these Chapter 11 cases, the Suntech Group will be one step closer to finalizing its international restructuring.”