Failed US solar company uses global lawsuit as leverage to cover its debts and pump stock price… and it’s working

Suniva solar is trying hard to sell its soul and it just might win. The ITC Section 201 trade case – in which Suniva is suing all global solar power manufacturers for too much competition – was bankrolled by an investment firm, SQN Capital Management, in order to use as leverage to extort successful solar power companies to buy the hardware of the failed manufacturer. The investment firm attempted to get a buyer in May, stating that a successful sale would negate the need for the lawsuit. They failed at finding a buyer and the lawsuit has passed the point of no return.

Now it seems Suniva might still win, as two major solar companies – LONGi and Canadian Solar, seem to have shown interest in buying their assets.

Records of documents filed as part of Suniva’s bankruptcy proceeding in Delaware include many references to “sale efforts” and “correspondence with potential purchasers.” A non-disclosure agreement for potential sale was drafted Oct. 4. The documents include the names of manufacturers LONGi and Canadian Solar.

SQN Capital Management is Suniva’s largest creditor, and still owed $52 million by the bankrupt solar manufacturer. As part of the deal to bankroll the case, SQN proposed to receive options to acquire 40% ownership in Suniva and to get 50% of any increase in value in the company’s shares that result if the trade case is approved by the Trump administration.

In a letter to the Chinese Chamber of Commerce, dated May 3 2017, Silkowski offered to simply drop the tariff petition entirely, if a buyer could be found for Suniva’s remaining manufacturing equipment, priced at a convenient $55million – enough to recover SQN’s bad loan and legal fees. The plan was spelt out in detail:

“If SQN were to arrange a sale of the equipment that secures its investment, SQN would have no interest in providing additional funding to Suniva and the company would have to convert to a Chapter 7 Bankruptcy where the assets are liquidated and the company ceases to exist. If Suniva were not to receive funding from SQN, the Trade Case would have to be withdrawn.”

The original Extortion Letter on Scribd:

Suniva is currently 64% owned by a Chinese company. Shunfeng International Clean Energy Ltd., based in Hong Kong, acquired a 64 percent stake of Suniva in 2015. The qualifications of the board is seemingly exemplary.

Electrek’s Opinion

In a recent interview, the CEO of SQN Capital Management, Jeremiah Silkowski insisted “we got involved in this because we honest to God believe we are protecting the solar industry. If somebody doesn’t draw the line here and fight — it’s over.” That’s an interesting position for an individual to take, especially someone that just wrote the Chinese government asking for a cool $50 million to drop the exact same lawsuit. Did Jeremiah have a sudden change of heart?

A fun twist – SQN hired Jim Modak, Suniva’s former Chief Financial Officer for Suniva. I guess if you’re about to lose $50 million, you might as well hire the guy who was able to manipulate you into giving that money to a dying company.

And the worst part – the reason this company might get sold to these solar power companies is that its value has increased. The reason it has increased is that Suniva has resources – people, land, structures, machines and supply chains – inside of a marketplace (the USA) that might soon have limited access. The limited access will be as a result of the lawsuit and Trump’s desires to protect coal, while looking good for the cameras attacking China.

A final quote that I thought was quite fitting:

“They were scrap dealers and vulture-type people, offering to buy the equipment for nothing,” CEO Silkowski said in an interview. “Our approach is to go through with the trade case.”

Yes, LONGi and Canadian Solar did make a correct judgment call on the value of Suniva being nothing.

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