When a distressed company reshuffles its debt deck, the stock typically jumps up. After all, management is obviously taking steps to nurse its baby back to health. But Evergreen Solar (Nasdaq: ESLR) is taking a beating for its fiscal restructuring plans today -- as well it should.

You see, this is not a shareholder-friendly debt restructuring, where the company simply refinances old loans under better terms. Instead, we're looking at a complicated four-part plan that includes:

  • Exchanging convertible notes due in 2013 for new ones due in 2017 and 2020. So far, not bad.
  • Selling $40 million more new debt notes after replacing the old $387 million debt balance. That's more than a 10% increase. Rut-roh, Scooby.
  • Implementing a preapproved 1-for-6 reverse stock split, designed to drag Evergreen out of penny-stock trouble with the Nasdaq. Reverse splits aren't always fatal, but many investors in Sirius XM Radio and other reverse-split candidates will tell the Evergreen people that they don't always help, either.
  • And here's the kicker: Evergreen wants to double the authorized number of shares after the split in order to cover those new convertible debt notes converting, and to sell more stock as needed. Double the shares, dilute your existing holdings by half. This is bad.

Evergreen needs shareholder approval to go through with this plan. I don't see how sensible investors would agree to damage their own holdings so badly in order to give the company some fiscal breathing room.

Then again, maybe this is just the perfect excuse to leave Evergreen Solar behind and go invest in a more promising business instead. This company has a long history of destroying shareholder value, the stock has essentially been cut in half over the past year, and the best interests of shareholders are clearly not Evergreen's top priority; debt owners control more than half of the enterprise value.

Industry giants Trina Solar (NYSE: TSL) and First Solar (Nasdaq: FSLR) are hugely profitable with net cash on their balance sheets, and they're growing faster than Evergreen. That's not an outright recommendation, but it's a good place to start looking for a replacement.

Would you agree to this callow debt restructuring, or is it better to jump ship? Discuss in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. First Solar is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.