Hoku creditors demand bankruptcy consolidation to avoid ‘injustice’

By Kali Hays

New York, March 30 – Hoku Corp. creditors Industrial Piping, Inc. and JH Kelly, LLC filed an adversary complaint against Hoku’s Chapter 7 trustee R. Sam Hopkins and Hoku Materials Inc. trustee Gary L. Rainsdon and are seeking a substantive consolidation of the company’s bankruptcy case, according to a March 27 filing with the U.S. Bankruptcy Court for the District of Idaho.

Industrial Piping holds a $13 million claim against Hoku, while JH Kelly holds a claim of $25 million related to pre-bankruptcy construction of a polysilicon plant that was halted in 2010.

According to the complaint, the estates of Hoku Corp. and Hoku Materials have not been treated as “distinct entities” and if a consolidation does not occur, any claims of avoidable transfers by Hoku Corp.’s trustee will prove “inequitable” and “will only result in grave injustice.”

Prior to the bankruptcy filing, Hoku Materials was a wholly owned subsidiary of Hoku Corp. and the companies had common ownership, officers and directors, filed consolidated financial statements and transferred asset for each other’s benefit “without observing corporate formalities.”

The creditors claim that an avoidable transfer plan “almost exclusively benefits” Hoku Corp.’s majority shareholder Tianwei New Energy Holdings Co., Ltd., “and destroys contractors and vendors who worked on the plant.”

“It would be a gross injustice for contractors and vendors to be ordered to pay Tianwei (through the Hoku Corp. estate) tens or hundreds of millions of dollars they were paid for the work they performed given Tianwei’s exercise of direct and complete control of Hoku Corp. and Hoku Materials, treatment of Hoku Materials and Hoku Corp. as one economic unit and the allowance of Hoku Corp. and Hoku Materials to be grossly undercapitalized, with the result that Hoku Materials could not pay contractors and left them owed tens of millions of dollars,” the filing said.

Hoku is a Pocatello, Idaho-based polysilicon manufacturer that filed for bankruptcy on July 5, 2013. The Chapter 7 case number is 13-40838.

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