SunEdison Shopping Vivint Assets Before Acquisition Closes

  • Terms of the Vivint acquisition were revised in December
  • `This deal has the potential to be the undoing of SunEdison'

SunEdison Inc. has yet to complete its $1.9 billion purchaseof Vivint Solar Inc. and it’s already shopping some of the company’s rooftop solar assets.

The purchase from Blackstone Group LP was announced in July and revisedin December, and SunEdison may have trouble closing the deal if it can’t find a buyer, said Patrick Jobin, a New York-based analyst at Credit Suisse Group AG.

“SunEdison is actively engaged in trying to sell those assets,” Jobin said in an interview Tuesday. SunEdison’s shares have slumped about 90 percent since the deal was announced. “They are a motivated seller.”

SunEdison gained 9.2 percent at the close in New York.

The Vivint deal capped a multi-billion-dollar buying spree that made SunEdison the biggest clean-energy developer, with wind and solar projects on six continents. It also prompted investors to take a closer look at the company’s debt, which ballooned to almost $11.7 billion at the end of the third quarter. Ben Harborne, a spokesman for Maryland Heights, Missouri-based SunEdison, declined to comment.

That scrutiny helped drag down SunEdison’s shares. Vivint, the second-biggest U.S. rooftop power installer, has also slumped, after initially surging on the potential acquisition.

“This deal has the potential to be the undoing of SunEdison,” Angelo Zino, an analyst at S&P Capital IQ, said in an interview Tuesday. “Clearly, they’re under financial distress.”

TerraForm Portfolio

As SunEdison’s market value slumped so did that of TerraForm Power Inc., its publicly traded holding company that buys and operates power plants. TerraForm was involved in the Vivint deal, initially agreeing to buy 523 megawatts of installed rooftop power systems. That was reduced in December to 470 megawatts, at a lower price. Vivint shareholders are scheduled to vote on the sale next month.

The complicated transaction has also attracted the attention of activist investors, including hedge fund billionaire David Tepper. His Appaloosa Management LP controls 9.5 percent of TerraForm Power and filed a lawsuit this month to block the deal, which he says offers more benefits to SunEdison than it does to TerraForm and its shareholders.

‘Bad Precedent’

If TerraForm can’t buy the Vivint assets as part of the deal, SunEdison needs to find another buyer, said Jobin.

“If TerraForm is blocked, it sets a bad precedent,” Jobin said. That’s why SunEdison is exploring a sale of Vivint assets, possibly to an institutional investor, such as an insurance company or a private equity firm.

SunEdison’s strategy of flipping assets as soon as they’re acquired has precedent. In the past month, SunEdison bought and then immediately sold a one-third stake in a portfolio of 567 megawatts of solar assets; it bought the assets from Dominion Resources Inc. and then sold them to a partnership it formed last year with JP Morgan Asset Management.

“They’re going to have to find a way to get this deal done,” Zino said. “Obviously, Vivint Solar isn’t worth nearly what it was several months ago. That’s why we’ve seen Blackstone willing to change the terms of this deal -- to get this thing done.”

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