SunEdison Plunges on Report of Plans to File for Bankruptcy

  • Company in talks with two creditor groups on loan, WSJ says
  • SunEdison falls 45 percent in heavy after-hours trading Friday

Investors had a swift and emphatic response to a report Friday that SunEdison Inc. was preparing to file for bankruptcy protection: sell.

The Wall Street Journal reported after U.S. markets closed on Friday that SunEdison, the world’s largest renewable-energy company, is in talks with two creditor groups for a loan to tide it over during the process. The newspaper cited unidentified people familiar with the matter.

SunEdison’s shares last changed hands at 23.5 cents in heavy after-hours activity on Friday evening, down 45 percent from 43 cents at the end of regular trading on the New York Stock Exchange, which was the lowest since the company went public in July 1995.

“The reaction last night was the right reaction,” Gordon Johnson, an analyst at Axiom Capital Management Inc., said in a telephone interview Saturday. “If they file, the equity is worth significantly less than where it’s trading right now.”

Ben Harborne, a SunEdison spokesman, didn’t return calls seeking comment.

Risk of Default

The prospect of bankruptcy protection has shadowed SunEdison for weeks, after the company spent more than $3 billion since the start of 2014 buying wind and solar projects on six continents and accumulating $11.7 billion in debt.

TerraForm Global Inc., a public yieldco holding company of wind and solar farms that SunEdison founded and controls, disclosed this week that its parent may be on the verge of seeking bankruptcy protection. “Due to SunEdison’s liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection,” TerraForm said in a filing Tuesday.

SunEdison has twice delayed filing its 2015 annual report, citing a “material weakness” in its internal accounting system and an internal inquiry into its financial position. The delays put the company at risk for technical defaults on at least $1.4 billion in loan and credit facilities. The loans and credit lines require the company to file the report within 90 days of the end of its fiscal year.

The company also faces a lawsuit from Vivint Solar Inc., a Utah-based rooftop solar developer that it planned to buy, over its failure to close the $1.9 billion acquisition. SunEdison disclosed in a filing Thursday that it had received a subpoena from the U.S. Department of Justice and a similar inquiry from the U.S. Securities and Exchange Commission over the scrapped Vivint deal.

Competition to Provide Loan

Creditors will probably take control of SunEdison and its power projects, the Wall Street Journal reported Friday, citing people familiar with the situation.

While the company has held meetings with creditors to negotiate a loan to see it through a Chapter 11 filing, competition for the deal among lenders has delayed an agreement, according to the Journal. On one side are bank lenders led by Deutsche Bank AG, the newspaper cited the people as saying; on the other are a group of creditors, mainly hedge funds focused on distressed companies, that participated in a junior-debt offering in January that raised about $725 million, according to the Journal.

A bankruptcy filing would be problematic for TerraForm and another SunEdison yieldco, TerraForm Power Inc., the newspaper said. The yieldcos, it said, are in far better financial shape than SunEdison -- their wind and solar farms sell power to utilities under long-term contracts -- but depend on the company for many services. David Tepper’s Appaloosa Management LP disclosed in a filing Friday that it had boosted its stake in TerraForm Power to 10.88 percent from 9.5 percent.

The yieldcos, the Journal said, don’t plan to file for bankruptcy protection, but their shares represent much of SunEdison’s value. In recent months, bidders have inquired about purchasing SunEdison’s stakes in one or both of the TerraForm entities, the Journal reported, citing people familiar with the conversations.

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