PosiGen: Solar B Corp's Collapse Amid Fraud Allegations

PosiGen, PBC, the New Orleans-based Public Benefit Corporation that pioneered residential solar access for low-to-moderate income households, filed for chapter 11 bankruptcy on November 24, 2025 in the Southern District of Texas. What began as a mission-driven solar company serving customers with FICO scores as low as 550 across 15 states has become one of the most contentious bankruptcy cases in recent memory—marked by allegations of double-pledging assets, commingling funds, diverting project revenues, and multiple competing motions to appoint a chapter 11 trustee.

The case presents a stark collision between PosiGen's social mission origins and the complex financial engineering that funded its growth. 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, now controls both the DIP financing (with credit bid rights) and the non-debtor affiliates through an independent manager—creating conflicts of interest that pervade the entire restructuring.

Case Snapshot

The Path to Collapse: A Timeline of Precipitating Events

The final months before PosiGen's bankruptcy reveal a rapid unraveling driven by missed payments, alleged misconduct, and aggressive creditor action:

The velocity of this collapse is striking. 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 significant growth deceleration in 2024-2025. After years of double-digit growth, the sector cooled as the initial wave of early adopters saturated and financing became more challenging.

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. While California was PosiGen's most significant market impact, similar policy changes rippled through other states, reducing customer savings and undermining the value proposition.

Rising Interest Rates: The Federal Reserve's aggressive rate-tightening cycle directly impacted solar financing economics. Customer acquisition costs rose as financing became more expensive, while lease payments that once offered clear savings compared to utility bills became less attractive.

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 that prepetition mismanagement fundamentally compromised PosiGen's financial position—including double-pledging assets, commingling funds across entities, and diverting revenues from project companies.

Pre-Petition Capital Structure

PosiGen's capital structure reflects the complex financing arrangements common in residential solar: a layered cake of 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 as the company scrambled for liquidity—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, dwarfs all other obligations. Its acceleration in August 2025 triggered the cascade of events leading to bankruptcy. The Connecticut Green Bank and DC Green Bank facilities reflect PosiGen's partnerships with state-sponsored green financing institutions—partnerships that have now become adversarial. The bankruptcy filing followed a loan breach lawsuit as creditors moved aggressively against the company.

Other Significant Obligations

Trade payables reflect PosiGen's pre-petition operating challenges as the company extended payment terms while liquidity deteriorated.

Allegations of Misconduct and Trustee Motions

What distinguishes the PosiGen bankruptcy from typical restructurings is the severity and specificity of alleged prepetition misconduct. Multiple parties have alleged fraudulent conduct warranting displacement of current management through chapter 11 trustee appointment.

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. CGB argues that the current management, which allegedly perpetrated the misconduct, cannot be trusted to maximize value for creditors. PosiGen has urged the court to reject the trustee request, arguing that past allegations don't justify such a drastic 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.

The resolution of these trustee motions will be determinative for the case's direction. If appointed, a chapter 11 trustee would displace current management and assume control of the estates—potentially pursuing claims against insiders and developing an alternative restructuring path.

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 financing structure reveals Brookfield's dominant position in the case:

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 15% PIK interest rate is aggressive, and the short maturity (tied to January 16, 2026) creates significant pressure for rapid case resolution.

DIP Fee Structure

The combined 15% in DIP fees (7.5% funding plus 7.5% exit) substantially increases the effective cost of the financing. These fees become part of the credit bid amount, enhancing the DIP lenders' acquisition capacity. 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, creating a floor for any auction: a competing bidder must not only match Brookfield's $41 million but must pay the DIP facility in full, in cash, at closing. This credit bid mechanism effectively gives Brookfield control over the sale outcome. Unless a third party is willing to pay cash sufficient to satisfy the DIP in full plus exceed any equity component of Brookfield's bid, Brookfield will acquire the assets. The "go-shop" period theoretically allows for competing bids, but the cash hurdle is substantial.

The carve-out provisions are relatively modest, limiting the fees that professional advisors can accumulate before their claims are subordinated to the DIP lenders. The $1.5 million Committee Fee Cap particularly constrains the Unsecured Creditors' Committee's ability to conduct extensive investigations or litigation.

Key Constituencies and Conflicts

The Brookfield Control Problem

Brookfield's position in the PosiGen bankruptcy presents extensive conflicts of interest:

This concentration of control in a single party raises fundamental questions about whether arm's-length outcomes are achievable. Brookfield simultaneously controls the non-debtor affiliates (where significant value resides), provides the financing that funds the bankruptcy, and stands ready to acquire the debtor assets through credit bid. Other stakeholders have limited ability to challenge this control structure.

Major Creditor Constituencies

Other Significant Parties

The Tax Equity Partnerships present a particularly complex issue. TEPs 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 was both severe and sudden:

The termination of 70% of the workforce within days of the Backleverage acceleration effectively 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 that traditional solar companies ignored. Beyond its PBC legal structure, PosiGen maintained Certified B Corporation status through B Lab, the nonprofit that certifies companies meeting rigorous social and environmental standards—requiring demonstrable measurable impact across governance, workers, community, environment, and customers.

Origins and Impact

Founded in 2011 in New Orleans in the aftermath of Hurricane Katrina, PosiGen emerged from a recognition that low-income households—those who would benefit most from reduced energy costs—faced the greatest barriers to solar adoption. Traditional solar financing required credit scores and income levels that excluded much of PosiGen's target market.

PosiGen's model addressed these barriers:

By serving customers that other solar companies deemed too risky, 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 benefit from solar energy immediately. By late 2024, PosiGen had secured $600 million in total funding from Brookfield through three investment rounds since 2023.

The Mission-Finance Tension

PosiGen's bankruptcy illustrates the fundamental tension between social mission and financial sustainability. The company's commitment to serving low-income customers created:

• Higher credit risk: Customers with lower credit scores present elevated default risk
• Lower margins: Serving cost-conscious customers in competitive markets constrained pricing
• Complex financing: Tax Equity Partnerships and multi-layered debt structures were necessary to fund growth
• Dependence on policy: Net metering and other policies that made solar economical for customers

When market conditions shifted—interest rates rose, net metering changed, growth slowed—PosiGen's cost structure and debt burden became unsustainable. The mission that drove the company's founding could not insulate it from financial reality. Over 100 solar companies filed for bankruptcy in 2024—the highest number in nearly 20 years—as industry headwinds intensified.

Customer Contract Treatment

The treatment of PosiGen's 40,000+ residential solar leases remains critical to any 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 (likely Brookfield through credit bid) will inherit servicing obligations

For the customers PosiGen was founded to serve—many of whom have limited energy alternatives—continuity of service depends on successful completion of 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: After years of double-digit annual growth, residential solar installation growth slowed significantly in 2024-2025. The initial wave of early adopters had been largely captured, and reaching the next tier of potential customers proved more expensive.

Net Metering Reform: California's NEM 3.0 policy, which significantly reduced compensation for solar energy exported to the grid, sent ripples throughout the industry. Other states have implemented or are considering similar reforms that reduce the economic value proposition of rooftop solar.

Interest Rate Impact: Higher interest rates increased the cost of solar financing while simultaneously reducing consumer purchasing power. Monthly lease payments that once offered clear savings compared to utility bills became less attractive as financing costs rose.

Customer Acquisition Costs: As the market matured and easy-to-reach customers were captured, customer acquisition costs increased substantially. The marketing and sales expense required to sign each new customer rose even as revenues 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 FICO scores as low as 550 meant higher default rates and more limited ability to pass through cost increases. These customers are, by definition, financially constrained.

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) provided favorable financing terms but created sophisticated creditors who are actively engaged in the bankruptcy. 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 combined filing reflects the compressed timeline driven by DIP maturity pressure.

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 theoretically allows third parties to compete, but the cash requirement to top the credit bid presents a significant barrier.

The case timeline is extremely aggressive, with DIP maturity on January 16, 2026 creating urgency while pending trustee motions could disrupt the plan timeline and committee objections require resolution. The tension between the DIP-driven timeline and the unresolved trustee motions creates significant uncertainty. If a trustee is appointed, the entire restructuring approach could change—potentially including pursuit of claims against current management and a different sale process.

Key Timeline

Key Issues to Watch

Several critical issues will shape the outcome of PosiGen's bankruptcy. The pending trustee motions from Connecticut Green Bank and List Government Receivables Fund represent the most significant near-term issue. If the court appoints a chapter 11 trustee, current management would be displaced and the case's direction could change substantially—a trustee might pursue claims against current insiders, develop alternative restructuring approaches, challenge the Brookfield-led sale process, or extend the case timeline beyond DIP maturity.

The allegations of fraud, diversion, and commingling require investigation regardless of whether a trustee is appointed. The Unsecured Creditors' Committee and other parties are examining prepetition conduct that could give rise to claims against insiders, preferential transfer recovery, or challenges to secured creditor claims. Meanwhile, whether any third party will compete with Brookfield's $41 million credit bid remains uncertain. The cash hurdle (paying off the DIP in full) and the complexity of the project-level structures create barriers for potential bidders. Without competitive bidding, creditors have limited ability to demonstrate that the credit bid undervalues the assets.

The ownership of project-level assets and cash flows—claimed by Tax Equity Partnerships, Project Companies, and various secured lenders—requires resolution, as these disputes affect what assets the debtors can actually sell and what proceeds are available for creditor distribution. Finally, the 40,000+ residential solar customers depend on continued service during and after bankruptcy. How customer contracts are treated in the sale—assumed by the buyer, assigned to a third party, or otherwise transitioned—affects both customer outcomes and enterprise value.

FAQs

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 ultimately bankruptcy.

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. The mission to serve low-income customers depends on successful completion of the restructuring.

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. As a state-sponsored green financing institution with a mission-aligned focus, 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, creating pressure for rapid resolution. However, the pending trustee motions, adversary proceedings, and inter-creditor disputes could extend the timeline—particularly if a trustee is appointed and pursues alternative approaches.

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