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Sungevity Cancels Auction, Goes with Stalking Horse Bid

11 April 2017

Rooftop solar panel firm Sungevity Inc. told a Delaware bankruptcy judge that it was canceling its planned Chapter 11 auction and going with a stalking horse offer because the company had received no other qualifying bids by the Monday night deadline.

In a notice filed late Monday, Sungevity said that when the 5 p.m. deadline came and went, no offers topped the company’s stalking horse deal, which consists of a $50 million credit bid by a joint venture of Minnesota private equity firm Northern Pacific Group and prepetition creditor Hercules Capital Inc.

“No qualified bid other than that received from the stalking horse bidders was received prior to the bid deadline,” the notice said. “As such, the auction will not be held and is hereby cancelled.”

Sungevity will be moving forward with a sale hearing before U.S. Bankruptcy Judge Kevin Gross on April 17, when the $50 million transaction with the Northern Pacific-Hercules venture will be heard for approval. Judge Gross had limited the amount of the prepetition debt that Hercules could use to credit-bid in its share of the stalking horse offer to $30 million. The other $20 million of the credit bid covers the debtor-in-possession financing package being provided by the joint venture, called LHSC Solar Holdings Inc.

Judge Gross said at the time that allowing Hercules to credit-bid the full amount of its $55 million prepetition secured claim would chill bidding and prevent other offers from coming in ahead of the bid deadline.

The stalking horse offer will leave $2.25 million behind in the bankruptcy estate that will be used to pay administrative costs of the case and possibly provide some small recoveries for unsecured creditors. That group of stakeholders had filed a broad objection to Sungevity’s sale plans and DIP loan, saying it was a loan-to-own strategy being run by the DIP lenders that would leave the estate insolvent. The objection was resolved ahead of a hearing for final approval of the DIP with the lenders pledging to leave behind the $2.25 million in cash.

Representatives for Sungevity did not immediately respond Tuesday to request for comment.

Sungevity filed for Chapter 11 in March, about three months after a planned acquisition by Boston private equity firm Easterly Capital LLC — a deal with an initial, $350 million price tag — fell through and pushed the rooftop solar company into a liquidity crisis.

That deal had been set to allow the company to go public and give it access to up to $200 million in capital that could be funneled back into its growth plans.

The company listed nearly $170 million in debt, including nearly $23 million in unsecured trade debt, $55 million in secured term and revolving loans owed to Hercules, $15 million owed to MMA Energy Capital LLC, and a $9.5 million emergency bridge loan provided by Wilmington Savings Fund Society FSB after the Easterly deal fell through.

Sungevity is represented by M. Blake Cleary, Jaime Luton Chapman and Kenneth A. Listwak of Young Conaway Stargatt & Taylor LLP and Jonathan I. Levine, Jennifer L. Marines, Melissa A. Hager and Erica J. Richards of Morrison & Foerster LLP.

The DIP lenders and stalking horse bidders are represented by Domenic E. Pacitti of Klehr Harrison Harvey Branzburg LLP and Brad Weiland and Cristine Pirro of Kirkland & Ellis LLP.

The case is In re: Sungevity Inc. et al., case number 1:17-bk-10561, in the U.S. Bankruptcy Court for the District of Delaware.

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