(Bloomberg) -- Solar-panel loan arranger Sunlight Financial Holdings Inc. went bankrupt after rising interest rates mangled its balance sheet and dampened demand for its offerings.

The company sought Chapter 11 protection in Delaware on Monday, listing liabilities of at least $500 million and assets of at least $100 million in its bankruptcy petition. The filing lets Sunlight keep operating while it seeks court approval of a deal to sell itself.

Sunlight began wavering in late 2021 when its base of solar-panel installers struggled to find workers, leading to project delays and cancellations, Chief Executive Officer Matthew Potere said in court papers. Slowdowns weighed on the company, which makes its money collecting fees on solar-panel installation loans.

The business then deteriorated quickly after the Federal Reserve began raising interest rates last year. Consumers shied away from the now-pricier solar-panel loans, and credit unions that were buying them pulled back, Potere said. 

The new credit environment pushed Sunlight further into the business of reselling loans that it had arranged after getting a bank to temporarily fund them, court papers show. It incurred “significant losses” doing that last year as it offloaded into a high-rate market many loans arranged when rates were lower, Potere said. 

Cross River Connection

In a painful example, Sunlight sold $153 million worth of loans funded by Cross River Bank for just $94 million last December, according to Potere. It has since become more difficult to sell such loans at all, Potere said. 

Cross River Bank has funded most of the company’s loans since the second half of 2022, according to Potere. It held $615 million of the debt as of Monday, which is $215 million more than an agreed-upon cap, according to court papers. The loan warehousing line is slated to shrink as part of the bankruptcy.

Fort Lee, New Jersey-based Cross River has agreed to provide $20 million of bankruptcy-exit financing, among other things, to Sunlight, court papers show. Meanwhile, a consortium of solar-energy investors that includes affiliates of Greenbacker Capital Management and Sunstone Credit have agreed to buy the majority of Sunlight out of bankruptcy for $15 million. 

Sunlight went public through a merger in 2021 with a special purpose acquisition company backed by Apollo Global Management Inc. Its shares slumped this year after it flagged “substantial doubt” about its ability to continue operations. 

Investors sued Apollo and other architects of the blank-check merger earlier this year, claiming shareholders were duped into participating in a deal that made millions for insiders.

The bankruptcy is Sunlight Financial Holdings Inc., 23-11794, US Bankruptcy Court for the District of Delaware. 

--With assistance from Michael Sin, Nurin Sofia and Janine Phakdeetham.

(Updates with context throughout.)

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