July 15, 2011 / 8:52 PM / in 7 years

UPDATE 3-Evergreen Solar won't make note interest payments

* Failure to pay will trigger default in 30 days

* Talks with debt holders to deleverage are ongoing

* Company could be looking for a buyer (Adds analysts’ comments, background)

By Nichola Groom

LOS ANGELES, July 15 (Reuters) - U.S. solar company Evergreen Solar Inc ESLR.O warned on Friday it would not make $4.2 million of interest payments due on its senior convertible notes, citing its weakened liquidity.

The failure to pay the interest will trigger a default if unpaid for 30 days, the company said in a filing with the U.S. Securities and Exchange Commission. The interest payments were due on Friday.

The announcement comes four days after Evergreen said in a regulatory filing a default under its obligations to note holders would likely result in a bankruptcy filing.

The company’s failure to make interest payments is the latest chapter in a downward spiral that has included the shuttering of a much-touted, but short-lived Massachusetts manufacturing facility and the virtual disappearance of the company’s once-lofty stock market value.

Based in Marlboro, Massachusetts, Evergreen has been struggling to regain its financial footing in the face of stiff competition from inexpensive Chinese rivals and a massive increase in the global supplies of solar panels that has sent prices into a tailspin.

Evergreen’s solar wafer technology was a favorite of investors in 2007 and 2008 because it used dramatically less of the industry’s key pricey raw material, polysilicon. At the time, however, silicon prices were 10 times what they are today, making that advantage less meaningful.

The company is still in talks with its debt holders to restructure its debt, although one analyst said they are running out of time.

“I don’t know what else is going to get the bondholders to get off their dime, but every day they wait there is less and less to recover,” said Wunderlich Securities analyst Theodore O‘Neill.

As of April 30, Evergreen had about $33 million in cash, the company said in May.

“I don’t think there is anything left now,” O‘Neill said.

Another analyst said the company was likely looking for a buyer, adding that a sale would be preferable to bondholders than a Chapter 11 bankruptcy filing.

“My guess is Evergreen is in active talks with potential buyers right now,” GTM Research analyst Brett Prior said.

He added, however, that potential acquirers -- likely Chinese solar companies or rival wafer makers -- might be gun shy about making a purchase with such turmoil in the industry.

“Pricing has come down dramatically in the last several years and a lot of these players are struggling,” Prior said.

It also had total liabilities of $455.5 million as of April 2, including $355.8 million of convertible notes.

The company is skipping a $4.1 million interest payment on its 4 percent senior convertible notes due 2013 and a payment of more than $90,000 on its 4 percent convertible subordinated additional cash notes due 2020.

Evergreen was forced earlier this year to close its factory in Devens, Massachusetts, and cut 800 jobs to preserve cash. Instead, it has pursued a strategy of outsourcing manufacturing to China. In April, Evergreen said it had been hurt by sluggish demand this year and may need to raise cash sooner than expected.

Also this week, the company said it was no longer in compliance with Nasdaq listing standards and, if delisted, the holders of its convertible notes would have the right to require the company to buy back their notes, which it would almost certainly be unable to do.

Evergreen shares have traded below $1 since late May, closing at $0.39 on Friday. The stock has been hammered since late 2007, when it hit an all-time high of $113.10. (Reporting by Nichola Groom; editing by Tim Dobbyn, Gary Hill)

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