September 16, 2008, 9:41 am
Evergreen Solar Extends Slide On Lehman-Related Fallout
Posted by Eric Savitz
Evergreen Solar (ESLR) shares this morning have extended yesterday’s sharp fall after the company late yesterday held a conference call with the Street on the fallout for the company from yesterday’s Chapter 11 following by Lehman Brothers.
In July, Evergreen issues $373.75 million of convertible notes. In connection with the deal, the company loaned 31 million shares to Lehman Brothers International (Europe) for hedging transactions. The company had originally concluded that, since the shares were to be repaid when the convert came due, the stock did not have to be included in EPS calculations. But now the company says it may have to include the additional shares in calculating EPS, diluting existing holders by about 19%, according to J.P. Morgan analyst Christopher Blansett. And the reason is obvious: the company may not ever get repaid for those shares.
The company had also paid another Lehman affiliate $39.5 million for a “capped call transaction” intended to reduce potential dilution by effectively increasing the conversion price on the notes. Blansett notes that the company “will likely be unable to recover” any of that cash.
Evergreen did say that the funds from its convertible deal are held by various commercial banks and not by Lehman or its affiliates, and that it has sufficient capital to complete construction of its facility in Devens, Mass.
Evergreen, which yesterday fell $1.74, or 27.6%, to $4.56, this morning is down another 87 cents, or 19.1%, to $3.69. |
