Sungevity in bankruptcy, gets $50 million lead credit bid for assets

By Caroline Salls

Pittsburgh, March 14 – Sungevity, Inc. filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Monday to facilitate a financial and corporate restructuring to strengthen its balance sheet and recapitalize the company, according to a company news release.

The company expects to continue its operations during the Chapter 11 proceedings.

In connection with the restructuring process, Sungevity said it entered into an asset purchase agreement with a group of investors, led by Northern Pacific Group.

Under the terms of the agreement, Northern Pacific Group will acquire substantially all of the company’s assets, including the equity interests in the European operations, in exchange for a $50 million credit bid.

If Northern Pacific is not the high bidder for the assets, Sungevity will pay it a $1.25 million break-up fee and reimburse up to $1.25 million of its sale-related expenses.

Competing bids are due on April 7, and an auction will be held on April 8, if necessary.

A final sale approval hearing and closing of the sale is expected to take place by the end of April.

“The agreement we have reached with the team led by Northern Pacific Group and its co-investors is a testament to their confidence in the future of Sungevity’s business,” Sungevity chief administration officer William Nettles said in the release.

“The actions we have announced today will allow Sungevity to emerge as a stronger and more competitive company.”

DIP financing

To provide capital for Sungevity’s operations and to fund the auction and sale process, the group of investors has committed to provide the company with up to $20 million in financing.

Subject to interim court approval, the financing will be immediately available to the company to fund its day-to-day operations and pay any expenses related to the Chapter 11 proceedings.

Wilmington Trust, NA is the DIP agent.

Interest will accrue at a rate of 15%, payable in-kind.

The facility will mature on the earliest of 30 days after the bankruptcy filing date if the final order has not been entered, delivery of a default notice, conversion of the Chapter 11 cases, 45 days following the bankruptcy filing, the closing of a sale of the company’s assets, the effective date of a Chapter 11 plan, the filing of a plan that does not provide for payment of the DIP obligations in full in cash and termination of the commitments and acceleration of the outstanding amounts.

A total of $10 million of the financing will be available on an interim basis, with a $5 million initial term loan to be drawn on the closing date.

The company also filed a number of customary motions with the court, seeking approval to pay specified pre-bankruptcy obligations, support its business operations and transition them through the sale process. These include the payment of employee wages, taxes, insurance, critical vendors and utility providers, as well as the continuation of the company’s customer support programs.

Debt details

According to court documents, Sungevity has $100 million to $500 million in both assets and debt, including $145.6 million in funded debt.

The company’s largest unsecured creditors are:

• Eastern Sun Capital Partners, LLC of Boston, with a $4.45 million convertible notes claim;

• Trina Solar (U.S.), Inc. of San Jose, Calif., with a $4.2 million trade payables claim;

• SolarEdge Technologies, Inc. of Fremont, Calif., with a $2.87 million trade payables claim;

• Mario Palumbo of New York, with a $2.1 million convertible notes claim;

• Orrick, Harrington & Sutcliffe LLP of San Francisco, with a $1.85 million trade payables claim;

• CCM Solar, LLC of Washington, D.C., with a $1.5 million convertible notes claim;

• Lowe’s Cos., Inc. of Mooresville, N.C., with a $1.03 million trade payables claim;

• SharesPost 100 Fund of Menlo Park, Calif., with a $1 million convertible notes claim;

• Stephen R. Polk Rev TR U-A-D 2-17-84 of Birmingham, Mich., with a $1 million convertible notes claim; and

• Dinwoodie Meservey Family Trust of Piedmont, Calif., with a $1 million convertible notes claim.

The company is represented by Young Conaway Stargatt & Taylor, LLP.

Based in Oakland, Calif., Sungevity is a technology-driven solar energy company, which enables users to get a quote without a site visit. It services 13 U.S. states as well as the Netherlands, Germany and the United Kingdom. The Chapter 11 case number is 17-10561.

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