Satcon files bankruptcy to strengthen balance sheet, capital structure

By Caroline Salls

Pittsburgh, Oct. 17 - Satcon Technology Corp. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

"This has been a difficult time for Satcon," president and chief executive officer Steve Rhoades said in a company news release.

"After careful consideration of available alternatives, the company's board of directors determined that the Chapter 11 filings were a necessary and prudent step, allowing the company to continue to operate while giving us the opportunity to reorganize with a stronger balance sheet and capital structure.

"Our goal is for Satcon to emerge from bankruptcy reorganization and continue to provide our customers with the quality products that they need."

Default

As previously reported, Satcon received a default notice concerning a $16 million unsecured, subordinated convertible note on Oct. 4. The note was issued in a June 2011 private placement.

The investor notified the company that it had failed to pay an installment that was due on Oct. 1. Under the note's terms, the noteholder may be able to put the note if a default occurs. The investor requested the company pay $7.5 million within five business days, which is 120% of the owed principal and interest, but noted that it was retaining all of its rights concerning the notes.

If the company failed to pay, the investor had the option of forcing the company to issue a new promissory note to replace the current, $16 million note with a discounted conversion price.

The company also said that its default under the note constituted a default under its credit agreement with Silicon Valley Bank.

First-day motions

In conjunction with the filings, the company filed a series of first-day motions that, with court approval, will allow it to continue to conduct business without interruption.

Satcon said these motions are primarily designed to minimize any impact on the company's customers and employees.

In addition, the company said it expects to obtain consent from its secured lenders to use cash collateral so it can continued to access funds to operate its business.

The hearing on interim cash collateral use is scheduled for Oct. 18.

Debt details

According to court documents, Satcon had $92.34 million in total assets and $121.93 million of total debt as of June 30.

The company's largest unsecured creditors include:

• Perfect Galaxy International Ltd. of Hong Kong, with a $25.7 million trade debt claim;

• Heights Capital Management of San Francisco, with a $10 million convertible notes claim;

• Creation Technologies of China, with a $2 million trade debt claim;

• Changzhou Ada International Trade of China, with a $1.04 million trade debt claim; and

• Artaflex of Markham, Ont., with a $1 million trade debt claim.

Rockport Capital Partners II, LP owns 18.1% of the company's voting securities, and NGP Energy Technology Partners, LP owns 8%.

The company is represented by Greenberg Traurig.

Satcon is a Boston-based provider of utility-grade power conversion solutions for the renewable energy market. The Chapter 11 case number is 12-12869.

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