Solar Trust proposed bid procedures draw objections as hearing nears

By Jim Witters

Wilmington, Del., May 7 - Solar Trust of America, LLC's proposed procedures for the sale of certain assets drew objections from Southern California Edison Co. and Global Finance Corp., which claim the company is trying to sell assets it does not own, according to documents filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Solar Trust is seeking approval of bid procedures and expedited procedures for granting stalking horse protections.

The sale procedures hearing is scheduled for 1 p.m. ET on May 11.

SoCal Edison objections

Edison claims that Solar Trust is seeking "to sell property that is not part of the estates," court documents state.

In particular, the debtors seek to sell "the renewable power purchase and sale agreement, dated June 9, 2009" between Edison and debtor CA Solar 10, LLC that was terminated prepetition, the Edison objection states.

Because the debtors challenge the effectiveness of the termination, the dispute should be subject to the alternative resolution provisions of the power purchase agreement. That agreement calls for binding arbitration, the documents state.

Edison's position is that

• For the power purchase agreement to be part of the sale, the dispute over termination must be resolved through arbitration, Edison claims;

• The debtors have "failed to identify any potential purchaser that would be capable of demonstrating the ability to cure the existing defaults thereunder and provide adequate assurance of future performance;" and

• The proposed sale procedures fail to comply to local court rules by limited participation to qualified bidders and excluding Edison from attending to protect its interests.

Global Finance objections

Global Finance entered into a joint development project in October 2007 with debtor STA Development, LLC, under which Global initially owned a 10% share of solar power generation projects the venture developed, court documents state.

The parties began development of Armargosa Valley Solar I and Armargosa Valley Solar II.

Global received a letter from STA in September 2011 stating that the joint development agreement had been terminated effective March 7, 2011. STA intended to sell the project o Solarhybrid AG, the Global objection states.

Global Finance sued in state court, and the case was moved to federal district court in Nevada. The court issued a temporary restraining order prohibiting the sale of the Armargosa project to Solarhybrid, the objection states.

Press releases on Solar Millennium AG and Solarhybrid AG's websites in February stated that the debtors were attempting to follow through with the sale, transferring Solar Millenium's entire portfolio of solar power projects in the Southwest United States to Solarhybrid and giving Solarhybrid a 70% stake in Solar Trust of America, according to court documents.

Global Finance continued development of the Armargosa project after STA stopped and sought an investor or buyer for the project, the documents state.

The company negotiated a deal with a major solar investor, the court documents state.

Global's position is the following:

• It is entitled to 90% to 100% equity in the Armargosa project;

• Its interest in the project cannot be part of the assets being sold by the debtors; and

• The temporary restraining order bars the sale.

Sale procedures

As previously reported, the proposed sale procedures allow Solar Trust to approve the sale of its projects through a single transaction or by separate purchase agreements for each project.

The company has been developing solar power plants in several western states. Its Blythe, Calif., plant would be the world's largest solar array, producing about 1,000-megawatts.

The final DIP order and the proposed sale procedures allow the debtor-in-possession lender to credit bid for each of the projects being marketed.

If a stalking horse bidder is identified, the debtors plan to file a motion by May 24 seeking stalking horse protections.

A hearing on the granting of stalking horse protections is scheduled for 10 a.m. ET on June 12.

The bid deadline is 4 p.m. ET on June 18.

Bids must be accompanied by a good faith deposit of $1 million or 10% of the purchase price, whichever is greater.

If necessary, an auction will be conducted on June 21.

The minimum initial overbid must be at least $250,000 more than the credit bid. All subsequent overbids must be in increments of at least $100,000.

A sale hearing is scheduled for 2 p.m. ET on June 27. Sales must close on or before July 16.

Solar Trust, an Oakland, Calif.-based unit of solar company Solar Millennium AG, filed bankruptcy on April 2 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 12-11136.

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