SunEdison Evaluating `Least Bad' Options for Closing Vivint Deal

  • Deal hinges on flipping Vivint portfolio of rooftop systems
  • Alternate buyers are looking at Vivint assets, Jobin says

SunEdison Inc. has several options for closing its complicated and contentious $1.9 billion acquisition of Vivint Solar Inc. and none of them look good for its balance sheet.

The Vivint deal has long hinged on SunEdison immediately flipping a chunk of the Utah-based company’s assets to its TerraForm Power Inc. yieldco unit. That plan was placed in jeopardy last month when billionaire hedge-fund manager David Tepper’s Appaloosa Management LP sued to block that portion of the transaction.

With SunEdison’s Plan A in question, the world’s biggest clean-power developer may need to come up with almost $800 million, the amount TerraForm was going to pay. That might include finding another buyer for the Vivint portfolio or selling other assets to complete the purchase from Blackstone Group LP.

“They need $800 million one way or another, whether from TerraForm or at the SunEdison level,” Michael Morosi, an analyst at Avondale Partners, said in an interview.

SunEdison is seekinganother buyer for the portfolio of rooftop solar systems, and some candidates are looking, said Patrick Jobin, an analyst at Credit Suisse Group AG who has a buy rating on SunEdison shares. However, his models show that a new buyer such as a private equity company would pay $108 million less than TerraForm.

‘Least-Bad Alternative’

“They are a very motivated seller,” Jobin said in an interview Tuesday. “The least bad alternative is for SunEdison to take that loss.”

SunEdison announced the Vivint deal in July and the terms were renegotiated in December. TerraForm had initially agreed to pay $922 million for a portfolio of 523 megawatts of Vivint’s rooftop solar systems, and under the revised terms it’s supposed to pay $799 million for 470 megawatts. The company said in December that it expects to complete the acquisition in the first quarter.

Ben Harborne, a SunEdison spokesman, declined to comment, as did Paula Chirhart, a spokeswoman at Blackstone.

Tepper’s Appaloosa owns a 9.5 percent stake in TerraForm, the third-biggest shareholder, and has said the Vivint deal is “fundamentally unfair” to TerraForm investors. A judge is expected to hear the dispute at a Feb. 16 hearing.

Selling Assets

If SunEdison can’t find another buyer, it may end up selling some other assets, probably at a discount, said Gordon Johnson, an analyst at Axiom Capital Management. That may include a swath of North American wind farms that were developed by First Wind Holdings LLC, a company SunEdison bought for $1.9 billion a year ago. SunEdison already agreed to transfer some old First Wind assets back to their prior owners. 

“These assets have some value, but we just don’t know how much,” Johnson said. “Or how big the discounts will be.”

One option that may be off the table is for SunEdison to issue more shares to fund the purchase. As part of a deal last week with David Einhorn’s Greenlight Capital, the activist investor that owns a 6.6 percent stake in SunEdison, the company agreed to refrain from selling new shares for two years after the Vivint deal closes.

Another option that doesn’t appear to be under consideration is canceling the Vivint deal. Despite widespread criticism, SunEdison has consistently said it plans to complete the acquisition, and Johnson said the seller is equally committed.

“Blackstone is not going to let them out of the deal,” said Johnson.

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