UPDATE 3-Energy Conversion files for bankruptcy protection

Tue Feb 14, 2012 11:59am EST

* Filing comes amid solar shakeout

* Company plans to sell units separately

* Says 70 percent of bondholders support plan

Feb 14 (Reuters) - Lightweight solar product maker Energy Conversion Devices Inc filed for bankruptcy protection on Tuesday, the latest in a string of solar companies that have collapsed in an industry shakeout.

The company, whose filing follows years of losses and months of public discussions with bondholders, said it would sell its United Solar Ovonic unit and other assets in bankruptcy.

Energy Conversion, whose solar laminate products are used for panels on rooftops and buildings, said it would continue to operate during the sale process.

It shares were down nearly 80 percent to about 30 cents in morning trading on Nasdaq. Other solar industry companies were also trading lower. First Solar, for instance, was off 9 percent at $28.11 on Nasdaq, and Suntech Power was down 7 percent at $3.47 on the New York Stock Exchange.

Energy Conversion's failure is the fourth major bankruptcy in the industry in the past year. Evergreen Solar Inc , Solyndra and SpectraWatt have also sought Chapter 11 protection.

Energy Conversion struggled to keep costs down as prices on solar panels fell, due in part to government subsidies to the company's Italian and German rivals. The company temporarily suspended manufacturing of its lightweight solar products last fall and said it would cut 500 jobs. Its bondholders hired advisers last fall as the company's problems worsened.

"Ultimately, their cost structure has been deemed unsustainable for a while, and the effects of the market in 2011 just exacerbated it," said Shayle Kann, a solar analyst with GTM Research.

Energy Conversion filed for bankruptcy in Michigan, where it is based. It said holders of about 70 percent of its $263.2 million of 3 percent convertible senior notes due 2013 support its proposed operating and sales plan.

That plan will essentially keep the flexible, lightweight thin-film photovoltaic product business -- its United Solar Ovonic unit -- operating while shedding debt and other legacy costs. The product is used in roofs and also consumer products, such as a solar cover for Amazon.com's Kindle E-reader. Energy Conversion expects to complete the sale of the unit in 90 days.

The company plans to sell its 39 percent stake in Ovonyx, a semiconductor technology company, other intellectual property and some fixed assets.

It also said it had sold its Ovonic Battery Co, which licenses advanced battery technology, to BASF Corp for $58 million. It first announced that sale process in July.

Its bondholders include Sanders Morris Harris, Angelo Gordon & Co., Diamondback Capital and Wolverine Asset Management, among other creditors, according to court documents.

According to those documents, Energy Conversion had both assets and liabilities in the range of $100 million to $500 million range when it filed for bankruptcy.

In addition to the Chapter 11 filing of the United Solar Ovonic unit, the company also filed a Chapter 7 bankruptcy case for Solar Integrated Technologies, which does engineering, procurement and construction of solar technology.

The company does not expect to be able to pay back all creditors and said shareholders will likely be wiped out.

The case is in re Energy Conversion, U.S. Bankruptcy Court, Eastern District of Michigan, No. 12-43166.

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