SunEdison Ability to Borrow Seen Hindered After Accounting Snag

  • `We can't imagine' institution willing to lend, S&P says
  • Renewables developer finds flaws in accounting systems

The money spigot may be drying up for SunEdison Inc., at least for now.

The most-indebted renewable-energy company will have little access to new capital after it postponed, again, the release of its 2015 annual report, according to three analysts. SunEdison cited “material weaknesses” in its accounting systems for the delay.

“We can’t imagine any financial institution being willing to lend money to them, especially given the distress that they’re in,” Angelo Zino, an analyst at S&P Global Market Intelligence, said in an interview Wednesday. “They’re unable in our view to tap either the equity or the debt markets.”

The assessment underscores SunEdison’s precarious position after its debt ballooned to almost $11.7 billion last year. It invested almost $3 billion in 2014 and 2015 scooping up developers and clean-power projects on every continent except Antarctica. In the process of becoming the world’s biggest renewable-energy developer, it amassed a portfolio of partially completed power plants that still need significant investment to finish.

Ben Harborne, a SunEdison spokesman, didn’t respond to e-mail and phone inquiries. The company said in a Jan. 7 presentation that it expected to have $619 million of cash on hand at the end of 2015. Of that amount, $563 million was committed to project development, and $56 million was available for general corporate use. The company forecast having $1.37 billion in cash at the end of this year.

Missed Deadline

The company was due to release more details of its liquidity position in its 10-K statement to the Securities and Exchange Commission on Tuesday. Instead, it said it would miss that deadline after new information technology systems bogged down its accounting processes. It gave no date for when the 10-K would be filed.

‘Very Surprised’

“I would be very surprised if they could raise debt or equity at this point,” Swami Venkataraman, a vice president at Moody’s Corp., said Wednesday. “Even private investors will probably shy away without a 10-K.”

SunEdison first postponed the release of its 10-K on Feb. 29, saying it would file within 15 days. On Wednesday, it said it hasn’t so far detected any flaws in the accounts it has previously filed. An internal audit committee, which is probing the accuracy of its financial reports after accusations by former executives, also hasn’t finished its work.

“At some point they’re going to run out of cash for the G&A expenses, and I think that could happen with one year,” Venkataraman said. “There’s a big hole there.”

SunEdison reported selling, general and administrative expenses of $296 million in the third quarter, and interest of $212 million.

Management ‘Hamstrung’

“Management is hamstrung, and there isn’t much they can say until they get these filings done,” Michael Morosi, an analyst at Avondale Partners LLC, said in an interview. He reduced his rating Wednesday to the equivalent of hold from buy. “You just throw up your hands and wait for something more tangible. It’s getting beyond the worrisome stage.”

SunEdison was unchanged at the close in New York. It’s plunged more than 90 percent in the past year, the most on the WilderHill New Energy Global Innovation Index, and has the most debt of the index’s 104 clean-energy companies, according to data compiled by Bloomberg.

SunEdison’s $320 million of 3.375 percent senior unsecured bonds maturing June 2025 dropped 3.5 cents to trade at 9 cents on the dollar at 10:43 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. 

SunEdison essentially has “no access to fund future projects,” Zino said, unless it manages to sell power projects to third-parties. “If they can’t raise capital via the equity or debt markets and they can’t sell existing assets -- and really the whole story of SunEdison hinges on raising capital via asset sales -- then it’ll eventually trigger a liquidity crisis.”

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