Energy Conversion Devices, Inc. (ECD) , publicly quoted company that produces and commercializes materials, products and production processes for the alternative energy generation, energy storage, and information technology markets filed for bankruptcy protection on Tuesday (link) with a plan to sell its business at a court-supervised auction. According to its bankruptcy plan, ECD wants to sell by separate sales its wholly owned subsidiary United Solar Ovonic LLC ("USO").
What was wrong with ECD? The deteriorating trend with the economic and financial performance is clearly exhibited through MORE ratings which are in 2011, 2010 and 2009 respectively CC (Pathological), B (Weak) and BBB (Adequate) (see below the ASKMORE Credit Report). The reasons behind “Pathological” class rating are quite clear according to solvency and profitability indicators. The solvency ratios are both in “Pathological” level, leverage got worsened due to eroded shareholders’ funds; and total assets/total liabilities got worsened due to decreasing total assets in 2011. The company has recorded a fall in the total sales by 22%. Profitability indicators are in “No Return” or “High Danger” levels: especially the “ROE” has gotten weaker and weaker because of decreasing shareholders’ funds and loss values at the end of the year. According to the comparison with the sector section of ASKMORE; it is observed that ECD is has had financial ratios which are below the sector average and most of the time (except liquidity) close to risky levels.