Solar Trust of America LLC is headed toward a Thursday, June 21, auction with a $10 million stalking-horse bid for one of its incomplete solar power facilities from BrightSource Energy Inc.
Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on June 15 approved the stalking-horse bid for Solar Trust's 500-megawatt project near Desert Center, Calif.
Solar Trust is looking to sell all four of its incomplete solar power facilities in California and Nevada at the auction, including another 500-megawatt facility in Amargosa Valley, Nev., as well as another project near Ridgecrest, Calif., that is still in an early-development stage. The projects are still under development and don't generate any revenue for the Oakland, Calif., debtor.
The debtor's largest asset includes the rights to develop one of the world's largest solar power facilities near Blythe, Calif. The project is to be built on 7,025 acres of public land in Riverside County and is expected to have a generating capacity of up to 1,000 megawatts. The multibillion-dollar project will include four plants that will deliver power to the California grid and supply about 300,000 households with electricity.
Under the bidding procedures, BrightSource would receive a $300,000 breakup fee and $250,000 in expense reimbursements if it loses the auction.
Interested parties seeking to compete with BrightSource for the Desert Center project must submit bids of at least $10.8 million by Monday. Subsequent bids would have to increase in increments of $100,000.
Bids for all the projects are also due Monday and must include a deposit equal to the greater of $1 million or 10% of the proposed purchase price.
Solar Trust's debtor-in-possession lender Mason Capital Management LLC can credit-bid its entire debt for one or more of the projects.
The DIP consists of a $25 million term loan and an $18.4 million letter of credit. The new-money loans bear interest at either LIBOR plus 400 basis points or prime plus 400 basis points. The DIP matures on July 15.
Should Mason choose to credit-bid, the initial overbid would be $250,000. All subsequent bids would have to increase in increments of $100,000.
Gross will consider the approval of the sales on June 27. All sales must close by July 16.
Two days before Gross approved the bidding procedures, Global Finance Corp. filed an adversary complaint against Solar Trust alleging ownership of its facility in Amargosa Valley that Solar Trust is also planning to sell at the auction.
In the June 13 complaint, GFC alleged that it entered into a joint development agreement with one of Solar Trust's debtor affiliates, STA Development LLC, on Oct. 4, 2007, to develop the Amargosa project. Under the agreement, GFC originally owned a 10% share.
According to GFC, on Sept. 1, STAD notified GFC that it was retroactively terminating the agreement as of March 7, 2011.
GFC alleged that STAD then forfeited its ownership rights to the development by ceasing to fund the project, and failing to make rent payments to the U.S. Department of Interior's Bureau of Land Management. GFC also alleged that STAD made no effort to find a buyer for the project and interfered with a potential investor's due diligence regarding the sale of the property in January.
On the other hand, GFC said it has continued to fund the project and had received encouragement from STAD to continue pumping money into the development. GFC also said it had negotiated a term sheet to sell the Amargosa project with a serious investor while STAD continued to pursue a sale to German solar company SolarHybrid AG.
GFC filed a lawsuit against STAD in the U.S. District Court for Clark County, Nev., on Nov. 8 seeking a restraining order preventing STAD from selling the project to SolarHybrid. The court granted the restraining order on Nov. 14, but STAD continued to pursue the sale, which eventually fell apart when SolarHybrid filed for insolvency in Germany on March 27.
Through the adversary complaint, GFC wants the court to enforce the joint development agreement, rule that GFC owns the entire project due to STAD's noncompliance and halt the sale of the Amargosa project.
Should the court allow the sale to proceed, GFC requested the court block a credit bid from Solar Trust's DIP lender, Mason Capital Management, because such a sale would be detrimental to GFC.
It is unclear how the adversary complaint will affect Thursday's auction.
Neither debtor counsel Justin H. Rucki and Michael R. Nestor of Young Conaway Stargatt & Taylor LLP nor GFC counsel Dennis A. Meloro of Greenberg Traurig LLP could immediately be reached for comment Monday.
Solar Trust filed for Chapter 11 on April 2.
Solar Trust's parent, Solar Millennium AG, filed for insolvency in Germany on Dec. 21. Solar Millennium has continued its liquidation and on June 4 filed for Chapter 15 bankruptcy protection in the Delaware Court so it could participate in Solar Trust's auction process without exposing itself to claims that otherwise must be submitted in its German proceedings.
Gross granted Solar Millennium recognition of its foreign main proceeding on June 15.
In its petition, Solar Trust listed assets between $1 million and $10 million and liabilities between $50 million and $100 million.
BrightSource's counsel is Eric Stephens of Orrick, Herrington & Sutcliffe LLP.
David B. Stratton, David M. Fournier and Evelyn J. Meltzer of Pepper Hamilton LLP represent the official committee of unsecured creditors.