Satcon trustee receives OK to operate business, plans early May sale

By Jim Witters

Wilmington, Del., April 11 - Satcon Technology Corp.'s Chapter 7 trustee received approval April 11 to operate the business through mid-May while trying to market the company's assets.

The approval is retroactive to the conversion of the case to Chapter 7 from Chapter 11 on Feb. 6.

During a hearing in the U.S. Bankruptcy Court for the District of Delaware, judge Kevin Gross also granted the trustee use of the secured lenders' cash collateral through May 15.

The cash collateral of China Great Wall Computer Shenzhen Co., Ltd. and pre-bankruptcy secured creditors includes $40 million of inventory at cost and $20 million of accounts receivable.

Chapter 7 trustee Charles M. Forman said the best way to maximize the value of the company's assets is to fulfill a backlog of goods to be delivered to customers and collect accounts receivable while developing a framework to sell the assets as quickly as possible.

Michael Holt, representing the trustee, told the court he hopes to file a bid procedures order within the next few days, with the hope of a sale in early May.

Creditor concerns

The planned sale of the company as a going concern and the subsequent piecemeal asset sale "failed dismally," said Steven E. Fox, attorney for secured lender Silicon Valley Bank.

The bank views "with limited optimism" the trustee's plan to complete inventory in production, deliver the goods to customers and attempt to collect accounts receivable.

Fox said the bank had three concerns about the trustee's plan:

• The size of the proposed budget, particularly projected professional fees. Forman addressed that concern by agreeing to a 10% variance limit and agreeing not to move savings in one line item for use on another line item;

• The continuing use of the bank's cash management system at no cost to the debtor. Fox said he is negotiating with the trustee to transition the cash management to another provider; and

• The strained relationship between the bank and China Great Wall.

Strained relationship

Fox said Great Wall has failed to comply with a Feb. 7 court order that required Great Wall to submit a budget for the use of Satcon's former employees to supply Great Wall with the proper software coding to continue to operate its equipment.

"This is a critical issue as the trustee proceeds with a sale motion," Fox told the court.

If Great Wall does not immediately comply with the court order, it should be denied credit bidding rights during the sale process, he said.

"Our position is that they should bring their checkbook and be prepared to backstop any credit bid that they make," Fox said.

Great Wall attorney James Bastian Jr. apologized to the court for failing to seek a formal extension of the seven-day deadline included in the Feb. 7 court order. However, he said, that deadline was Great Wall's idea, and his client is in compliance with the approval of the trustee's motion.

Great Wall anticipated a two-day or three-day engagement of former Satcon workers to transfer the coding, and Great Wall paid $160,000 toward their services, Bastian said.

But the trustee submitted a budget for the process that called for six weeks of work at a cost of $500,000. The parties then began negotiating an acceptable budget.

The negotiated amount is included in the trustee's budget approved during the April 11 hearing, Bastian said.

"SVB is setting up an argument down the line that Great Wall has acted in bad faith," he said. "But the order submitted by the trustee complies with the court order of Feb. 7. And we have not acted in bad faith at all."

Satcon, a Boston-based provider of utility-grade power conversion solutions for the renewable energy market, filed for bankruptcy on Oct. 17. Its Chapter 11 case number is 12-12869.

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