Investors
Energy Conversion Devices, Inc.
February 14, 2012 Announcement
Frequently Asked Questions for Investors
ECD and USO have voluntarily filed for Chapter 11 bankruptcy. ECD intends to sell USO as an operating business within the next 90 days. SIT (US) has voluntarily filed for Chapter 7 bankruptcy and will be liquidated.
Q. Why did this happen?
A. We are in a very dynamic industry that has undergone radical changes over the past few years. The recession caused our primary market, new and re-roof construction, to basically dry up. New entrants, mostly foreign, have flooded the market with cheap products which has put downward pressure on our selling prices. European governments, once huge supporters of solar energy, have dramatically cut back their incentives forcing prices down. Credit markets, once flooded with cheap capital, have dried up making financing large projects challenging. These market-based factors hurt our ability to keep our factories running and lower our costs, which led to growing losses. Our balance sheet, combining those losses with a heavy debt load, has hurt our credibility with customers, which has led to lost deals and lower volumes. Finally, the need to upgrade our technology to our Nano-Crystalline requires money, money which we have to use to cover our operating losses and debt obligations. These factors converged to create a downward spiral that we just could not get out of. Bankruptcy allows us to break this cycle and concentrate on taking all the best qualities about our business into a new company while leaving behind many of the problems.
Q. Why will things be better after bankruptcy?
A. Bankruptcy is not a cure to all of our problems. However, by starting fresh in a new company it is believed that we will be better situated to address the remainder of our problems. With new investors and fresh capital without debt, we will be more credible when selling to our customers. Our slimmed down company will be less expensive to operate. Our next-generation Nano technology, which targets 12%-14% conversion efficiencies, will improve the marketability of our products while being cheaper to produce. Our Open Solar™ initiative has shown tremendous potential, just with the achievements it has so far. We believe that the solar market is improving, and that as we approach grid parity in more markets, we will not be so reliant on government incentives in the future. In order to compete in the market, we need capital to implement our technology roadmap, which requires us to shed the debt to attract investment and that’s what we’re currently doing. There is a shakeout in the industry, and we expect to be one of the survivors.
Q. Why did you need to do this now and not in 2013 or when you run out of money?
A. The large amount of debt is crippling our business, preventing us from realizing our true potential. The company is burdened by costs incurred over the years which we are still paying for. While unfortunate, we cannot continue to operate in this state. Therefore, the decision was made in the best interest of the company in the hopes of creating a new, sustainable, financially stable entity. We’re looking for a fast turnaround to better the chances we have of success.
Q. Will my common stock be worth anything in the future?
A. Based upon the estimated value of the Company’s assets and forecasted costs and operating losses during the Chapter 11 process, the Company does not expect to generate proceeds sufficient to satisfy all of the Company’s pre-existing obligations to its creditors. Accordingly, unless the Company realizes greater-than-expected value from the sales process, the Company expects that no distributions will be made to holders of common stock and the common stock will be extinguished upon confirmation of the Chapter 11 plan.
Q. Will my convertible bonds be worth anything in the future?
A. The convertible bonds will be treated as general unsecured obligations of the company and will receive a distribution, if any, from the bankruptcy estate as determined by the bankruptcy court.
Q. If a new company is formed, will I receive stock or bonds in the new company?
A. No.
Q. Will ECD stock continue to trade?
A. Yes, the company stock will continue to trade during the bankruptcy process, however under the new ticker symbol ENERQ. At the conclusion of the bankruptcy process, it is most likely that the stock will be extinguished and it will cease to be traded.
Q. Can I continue to trade in ECD stock or bonds?
A. Yes, for now, however the value of the existing ECD securities is highly speculative. Accordingly, we urge caution be exercised with respect to existing and future investments in any of these securities.
Q. Will ECD hold an annual meeting of shareholders?
A. No.
Q. Will current management remain during the bankruptcy proceedings?
A. Yes.