Evergreen Falls After Investors Avoid Bond Exchange

Evergreen Solar Inc., a U.S. maker of solar wafers, reached its lowest price in more than a decade after investors shunned a bond exchange offer.

Evergreen shares fell 5 cents, or 2.3 percent, to $2.15 in Nasdaq Stock Market trading. Earlier they dropped to $2.09, the lowest intra-day price since November 2000.

Investors agreed to exchange $45.4 million of the Marlboro, Massachusetts-based company’s notes maturing in 2013 for new notes due seven years later, a “disappointing” 23 percent of the $200 million sought, Evergreen said today in a statement.

Evergreen canceled another exchange offer for $165 million of a different series of bonds due in 2015 because investors did not agree to tender more than the minimum of $50 million before the deadline expired on Feb. 11.

The company is shifting its focus, from making solar panels in the U.S. to making polysilicon wafers in China that are then used to make panels. It announced in January plans to close its Massachusetts manufacturing plant this quarter because its production costs are higher than its Chinese competitors.

Christine Hersey, an analyst at Los Angeles-based Wedbush Securities Inc., said that declining prices for wafers will be a challenge for Evergreen, and that the unenthusiastic response to the bond exchange may hinder the company’s plans.

“It’s not clear to me how they’re going to raise the money they need to become a competitive wafer supplier,” she said today in an interview. Hersey has had an “underperform” recommendation on the stock since September 2009.

Low-cost Wafers

“We are obviously disappointed that we were not able to convince a larger number of our note-holders to accept our offer, but we are still well-positioned to execute our strategy of supplying the lowest-cost, industry standard-sized wafers to the world’s leading solar module manufacturers,” Evergreen’s Chief Executive Officer Michael El-Hillow said in the statement.

The company said in a presentation to investors in January that it will be able to produce wafers at an average cost of 40 cents a watt this year, 27 percent less than the 55 cents a watt it estimates for Chinese makers of conventional wafers.

“Instead of being on the nominal end as a panel supplier, Evergreen is becoming a strategic supplier at the very front end of the panel manufacturing process,” Michael McCarthy, Evergreen’s director of investor relations and government affairs, said in an interview today.

Focusing on lower-cost wafers may help the company end almost three years of losses.

“For a company with extremely limited capital resources, they were spread way too thin,” Timothy Arcuri, an analyst at Citigroup Global Markets in San Francisco, said in an interview today. Arcuri upgraded Evergreen from “sell” to “hold” on Jan. 12.

“The reason I upgraded is that now they are strategically focused on the one area they have a competitive advantage,” Arcuri said.

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