Clean Energy Collective LLC

DEBTOR’S BUSINESS MODEL AND BANKRUPTCY

The Debtor developed and managed mid-scale solar energy facilities across the country prior to filing for bankruptcy. It did this through a network of over 100 subsidiary companies.

 The Debtor was forced to file for bankruptcy after its long-term debt came due and it was unable to pay or refinance the debt. While the Debtor has reduced its expenses, it has been unable to rehabilitate its business without a refinance of its long-term debt.

 Some, but not all, of the Debtor’s affiliated and subsidiary companies have also filed for bankruptcy. This creates a complex Chapter 11 situation with multiple interrelated cases and potential liability for non-debtor companies. While the Debtor has reported that it has not made payments to insiders, in a case with as many related companies as this one has, it is possible that some could be uncovered with the investigation. Experienced bankruptcy attorneys will be required for creditors to navigate this case.

DEBTOR PLANS TO LIQUIDATE

The Debtor has filed a status report in this case, indicating its intent to liquidate its remaining assets. At the same time, it has reported that its assets value somewhere near $1.9 million as compared to its secured debt of over $33 million and unsecured debt of nearly $7 million. Obviously, the ~$2 million in assets does not compare favorably to the $40 million in reported debt.

 Unsecured creditors are likely to be squeezed in this case. While some creditors may feel that this is a good reason to sit out and take whatever may come, it is actually the perfect reason to get involved. Unsecured creditors are in a unique position of potentially being able to force the Debtor to have a more robust and fair sale process than it might otherwise pursue. Such a process could lead to a higher payout to creditors than they might otherwise expect.

LIKELY OUTCOME FOR CREDITORS

The Debtor has already filed – and the Court has already granted – several motions of the Debtor to reject leases. This, coupled with the Debtor’s intent to liquidate, is a concern for unsecured creditors.

 When a Debtor in bankruptcy rejects a lease, the counterparty can assert damages based on the lease being broken early. Those damages are categorized as additional unsecured claims, which means that any payout to unsecured creditors will be reduced pro-rata. Since the Debtor intends to liquidate, it is reasonable to assume that every lease will be rejected and every counterparty will assert additional unsecured claims.

 Altogether, the circumstances of this case are unwelcoming for unsecured creditors, to say the least. That is why unsecured creditors should work together, form a committee of unsecured creditors, and fight for payment of what they are rightfully owed.