PosiGen: Solar B Corp's Collapse Amid Fraud Allegations

PosiGen, PBC, the New Orleans-based Public Benefit Corporation focused on residential solar access for low-to-moderate income households, filed for chapter 11 bankruptcy on November 24, 2025 in the Southern District of Texas. The case includes allegations of double-pledging assets, commingling funds, diverting project revenues, and multiple competing motions to appoint a chapter 11 trustee.

Founded in 2011 in post-Hurricane Katrina New Orleans with a goal of bringing solar energy to underserved communities, PosiGen ultimately accumulated approximately $206 million in debtor debt and sat beneath roughly $640 million in non-debtor facility obligations. Brookfield Asset Management, which serves as the primary lender on the non-debtor Backleverage Facility, controls both the DIP financing (with credit bid rights) and the non-debtor affiliates through an independent manager.

Timeline of Precipitating Events

The final months before PosiGen's bankruptcy include missed payments, alleged misconduct, and creditor actions:

Within four months of missing a single interest payment, PosiGen had terminated most of its workforce, lost control of its partnership interests, faced foreclosure, and filed for bankruptcy protection.

Root Causes of Distress.

Multiple factors converged to destabilize PosiGen's business model:

Residential Solar Market Slowdown: The residential solar industry experienced growth deceleration in 2024-2025.

Net Metering Policy Changes: California's NEM 3.0 reforms reduced the economic value of rooftop solar by changing how solar customers are compensated for excess energy exported to the grid.

Rising Interest Rates: The Federal Reserve's rate-tightening cycle impacted solar financing economics. Customer acquisition costs rose as financing became more expensive.

Operational Shutdown: With development financing unavailable, PosiGen shuttered its development business entirely. The mass terminations in August 2025 eliminated all sales and installation staff, leaving only servicing and administrative functions.

Alleged Financial Misconduct: Beyond market challenges, multiple parties have alleged prepetition mismanagement including double-pledging assets, commingling funds across entities, and diverting revenues from project companies.

Pre-Petition Capital Structure

PosiGen's capital structure reflects financing arrangements common in residential solar, including project-level debt, corporate obligations, and tax equity partnerships.

Debtor Funded Debt (~$206 million).

The debtor entities carried approximately $206 million in funded debt, split roughly 56% secured and 44% unsecured:

The Secured Convertible Notes represent the largest single claim against the debtor entities, with second-lien position on substantially all assets. The two Bridge Loans—provided in June and July 2025—are secured by specific solar system collateral.

Non-Debtor Facilities (~$640 million).

The majority of PosiGen's debt burden exists outside the debtor entities, in facilities secured by project company assets:

The $600 million Backleverage Facility, with Brookfield as primary lender, is larger than the other obligations. Its acceleration in August 2025 preceded the bankruptcy filing. The Connecticut Green Bank and DC Green Bank facilities reflect PosiGen's partnerships with state-sponsored green financing institutions. The bankruptcy filing followed a loan breach lawsuit.

Other Significant Obligations.

Trade payables reflect PosiGen's pre-petition operating obligations.

Allegations of Misconduct and Trustee Motions

Multiple parties have alleged prepetition misconduct and sought appointment of a chapter 11 trustee.

The Alleged Wrongdoing.

Creditor filings allege a pattern of misconduct:

Double-Pledging of Assets: The same solar assets were allegedly pledged as collateral to multiple lenders, creating conflicting security interests that cannot all be satisfied.

Commingling of Funds: Funds were allegedly mixed between PosiGen corporate accounts and project company accounts without proper accounting segregation, obscuring the true financial position of each entity.

Revenue Diversion: Project revenues that should have flowed to Project Companies and ultimately to their lenders were allegedly diverted to PosiGen corporate uses, depriving secured creditors of their collateral proceeds.

Misrepresentations: Management allegedly made false statements to lenders regarding the company's liquidity position and financial condition.

Bridge Loan Diversion: Approximately $24.4 million from the July Bridge Loan was allegedly diverted to the Backleverage Facility and developer entities rather than used for its intended purposes.

Competing Trustee Motions.

Two separate emergency motions to appoint a chapter 11 trustee were filed on December 19, 2025:

Connecticut Green Bank Motion: The CGB, holding second-lien claims on the Backleverage entities, seeks trustee appointment based on alleged prepetition fraud. PosiGen has urged the court to reject the trustee request, arguing that past allegations don't justify such a move when an independent chief restructuring officer is managing the case.

List Government Receivables Fund Motion: The $25 million July Bridge Loan lender separately moved for trustee appointment, alleging conversion of its loan proceeds and fundamental breach of the parties' agreements.

If appointed, a chapter 11 trustee would displace current management and assume control of the estates.

The alleged misconduct has also spawned adversary litigation within the bankruptcy. A WARN Act Class Action (Adversary Case 25-03845) was filed November 25, 2025, alleging violation of the Worker Adjustment and Retraining Notification Act in connection with the August 2025 mass terminations—the 470 terminated employees allege inadequate notice of their layoffs. Additionally, Rooftop Solar I, LLC and related entities filed an adversary complaint on December 8, 2025, seeking recovery of money and property allegedly diverted from the Project Companies, directly challenging the treatment of project-level revenues and assets.

DIP Financing and Credit Bid Structure

DIP Facility Terms.

The DIP is structured as primarily a roll-up facility. Of the $41 million total, only $14.48 million represents new money available to fund operations. The $8 million Brookfield Bridge roll-up converts prepetition exposure to superpriority status. The Project Proceeds Loans represent project-level cash that flows through to fund operations.

The DIP facility includes a 15% PIK interest rate and a maturity tied to January 16, 2026.

DIP Fee Structure.

The combined 15% in DIP fees (7.5% funding plus 7.5% exit) become part of the credit bid amount. The DIP facility authorizes the DIP Lenders—Brookfield and its partners—to credit bid the entire $41 million DIP claim in any sale of the debtors' assets, and a competing bidder must pay the DIP facility in full, in cash, at closing. The "go-shop" period allows for competing bids, subject to those terms.

The carve-out provisions include a $50,000 Chapter 7 trustee carve-out, a $100,000 post-default professional fee cap, and a $1.5 million committee fee cap.

Key Constituencies and Conflicts

Brookfield Roles.

Brookfield's position in the PosiGen bankruptcy includes multiple roles:

Brookfield controls the non-debtor affiliates, provides the financing that funds the bankruptcy, and is positioned to acquire the debtor assets through credit bid.

Major Creditor Constituencies.

Other Significant Parties.

Tax Equity Partnerships provided project financing by monetizing federal tax credits associated with solar installations. These structures typically give the TEP investors ownership of the solar systems until their tax benefits are fully utilized, after which ownership reverts to the developer. The ownership question—whether solar assets belong to the debtors, the Project Companies, or the TEPs—affects collateral coverage and sale proceeds allocation.

Workforce Reduction and WARN Act Claims

The August 2025 Mass Layoffs.

PosiGen's workforce reduction included:

The termination of 70% of the workforce within days of the Backleverage acceleration ended PosiGen's development business. The company transitioned from an active solar installer to a servicing entity managing existing customer contracts. Regional news outlets reported that homeowners who signed long-term lease agreements were left searching for answers as the Louisiana-based company ceased most operations.

WARN Act Litigation.

The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers to provide 60 days' advance notice of mass layoffs affecting 100 or more employees. Affected employees allege that PosiGen failed to provide the required notice, triggering liability for up to 60 days of back pay and benefits for each affected worker.

The WARN Act class action, filed November 25, 2025, seeks to recover these damages as administrative claims against the bankruptcy estates. If the claims are allowed, they would represent significant administrative expense priority—ahead of general unsecured creditors but behind the DIP facility.

Employee Incentive Programs.

The debtors sought approval for retention programs to maintain essential personnel:

Non-Insider KERP: Approved by interim order on December 9, 2025, this Key Employee Retention Program provides payments to essential non-officer employees necessary to maintain operations and complete the sale process.

Officer KEIP: The Key Employee Incentive Program for officers has faced objections from the U.S. Trustee, the Unsecured Creditors' Committee, and Connecticut Green Bank. Given the allegations of prepetition misconduct, opponents argue that incentive payments to the officers who allegedly participated in or presided over the misconduct are inappropriate.

Social Mission and B Corp Legacy

The Public Benefit Corporation Structure.

PosiGen was organized as a Public Benefit Corporation (PBC)—a corporate form that legally requires directors to consider the interests of stakeholders beyond shareholders, including customers, employees, and communities. This structure reflected PosiGen's founding mission: bringing affordable solar energy to underserved communities. Beyond its PBC legal structure, PosiGen maintained Certified B Corporation status through B Lab, the nonprofit that certifies companies meeting social and environmental standards.

Origins and Impact.

Founded in 2011 in New Orleans in the aftermath of Hurricane Katrina, PosiGen focused on low-to-moderate income households and residential solar access.

PosiGen's model addressed these barriers:

PosiGen built a portfolio of over 40,000 active residential solar leases across 15 states. The lease-based model eliminated upfront costs, allowing customers to receive solar energy under lease agreements. By late 2024, PosiGen had secured $600 million in total funding from Brookfield through three investment rounds since 2023.

The Mission-Finance Tension.

Over 100 solar companies filed for bankruptcy in 2024—the highest number in nearly 20 years—amid industry headwinds.

Customer Contract Treatment.

The treatment of PosiGen's 40,000+ residential solar leases is a central issue in the sale process:

• Servicing operations continue during bankruptcy
• Customers continue receiving solar energy under existing contracts
• Lease assumptions or assignments will determine customer relationships post-sale
• The buyer will inherit servicing obligations

Customer service continuity depends on the sale process.

Industry Context: Residential Solar Distress

Market Headwinds.

PosiGen's bankruptcy occurs against a backdrop of broader challenges facing the residential solar industry:

Growth Deceleration: Residential solar installation growth slowed in 2024-2025.

Net Metering Reform: California's NEM 3.0 policy reduced compensation for solar energy exported to the grid.

Interest Rate Impact: Higher interest rates increased the cost of solar financing.

Customer Acquisition Costs: Customer acquisition costs increased, and marketing and sales expenses rose as revenue per customer declined.

PosiGen's Unique Vulnerabilities.

Within this challenging environment, PosiGen faced additional pressures specific to its business model:

Low-Income Customer Focus: Serving customers with no credit score requirement reflects the company's target customer profile—56% of PosiGen customers had non-prime FICO scores below 670.

Tax Equity Complexity: The Tax Equity Partnership structures that enabled PosiGen's growth created complex ownership relationships and potential claims to project-level cash flows that complicate restructuring.

Lease Model Economics: Unlike purchase-based models where customer payments are complete upfront, lease-based revenue streams depend on customer creditworthiness and continued policy support over multi-year terms.

Green Bank Partnerships: Relationships with state-sponsored green banks (Connecticut Green Bank, DC Green Bank) are part of the capital structure. Connecticut operations shutdown plans were announced as two facilities closed with a third to cease operations by December 2025.

Plan of Reorganization

PosiGen filed a Combined Disclosure Statement and Joint Chapter 11 Plan on December 9, 2025.

The plan contemplates a sale of substantially all debtor assets, with the DIP lenders (Brookfield and partners) positioned to acquire through credit bid. The "go-shop" provision allows third parties to compete, and a competing bidder must satisfy the DIP in cash under the DIP terms.

The DIP maturity is January 16, 2026, and trustee motions and committee objections remain pending.

Key Timeline

Key Issues to Watch

Pending matters include the trustee motions filed by Connecticut Green Bank and List Government Receivables Fund, allegations of fraud, diversion, and commingling, and disputes over ownership of project-level assets and cash flows claimed by Tax Equity Partnerships, Project Companies, and secured lenders. The Unsecured Creditors' Committee and other parties have raised objections in connection with DIP financing and incentive programs. The 40,000+ residential solar customers continue to receive service during the case.

Frequently Asked Questions

Why did PosiGen file for bankruptcy? PosiGen faced a convergence of challenges: the residential solar market slowdown, net metering policy changes reducing customer economics, rising interest rates impacting financing costs, and alleged financial misconduct including double-pledging assets and diverting funds. The missed July 2025 interest payment triggered Backleverage acceleration, mass layoffs, and the bankruptcy filing.

What is a Public Benefit Corporation? A Public Benefit Corporation is a corporate form that legally requires directors to consider stakeholder interests—including customers, employees, and communities—alongside shareholder returns. PosiGen was organized as a PBC to reflect its mission of providing affordable solar access to underserved, low-income communities.

What are the allegations against PosiGen management? Multiple creditors allege that PosiGen management double-pledged assets to multiple lenders, commingled funds between entities, diverted project revenues, misrepresented the company's liquidity position, and improperly used Bridge Loan proceeds—totaling approximately $24.4 million allegedly diverted.

Who is seeking a chapter 11 trustee and why? Connecticut Green Bank and List Government Receivables Fund filed competing motions for trustee appointment on December 19, 2025. Both allege that prepetition fraud warrants displacing current management and appointing an independent fiduciary to control the estates.

What happens to PosiGen's 40,000+ customers? Residential solar lease customers continue receiving service during bankruptcy. Servicing operations are maintained, and customer contracts would transfer to the buyer in any sale.

Who is buying PosiGen's assets? The DIP lenders—led by Brookfield Asset Management—are authorized to credit bid their $41 million DIP claim. Unless a third party submits a superior cash bid, Brookfield will acquire substantially all debtor assets.

How many employees were laid off? Approximately 470 employees (over 70% of the workforce) were terminated on August 24, 2025, following Brookfield's acceleration of the Backleverage Facility. A WARN Act class action alleges these layoffs violated federal notice requirements.

What is the role of Tax Equity Partnerships? Tax Equity Partnerships (TEPs) provided project financing by monetizing federal tax credits for solar installations. TEPs claim ownership of certain project assets, creating disputes over collateral coverage and sale proceeds allocation.

What is Connecticut Green Bank's involvement? Connecticut Green Bank is a second-lien lender on the Backleverage entities and holds approximately $33 million in claims. CGB has filed for trustee appointment citing alleged fraud. The bank is suing for $2 million it is owed and battery assets pledged as collateral.

What is the timeline for resolution? The DIP facility matures January 16, 2026. Trustee motions, adversary proceedings, and inter-creditor disputes remain pending.

Who is the claims agent for PosiGen?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more expert analysis of renewable energy restructurings and chapter 11 developments, visit the ElevenFlo bankruptcy blog.