SunEdison Receives U.S. Subpoena on Vivint Deal Gone Wrong

  • U.S. Justice Department seeks information on terminated deal
  • SunEdison's purchase of Vivint fell through earlier this month

March was not a good month for SunEdison Inc.

The company disclosed Thursday it had received a subpoena from the U.S. Department of Justice and a similar inquiry from the U.S. Securities and Exchange Commission, after its $1.9 billion deal to buy Vivint Solar Inc. fell apart earlier in the month. It was also sued by Vivint. On Tuesday, a filing revealed the company was on the verge of bankruptcy. And its stock plunged 73 percent, the most-ever in a single month.

The solar and wind installer said in a regulatory filing that the government’s seeking information about the scrapped Vivint deal and the conduct of a former employee alleged to have committed wrongdoing “in connection with the Vivint termination negotiations.” The company was also asked for documents involving “intercompany” transactions with its TerraForm Power Inc. and TerraForm Global Inc. units, the financing of the company’s projects in Uruguay and investigations initiated by its audit committee, the filing shows.

The Justice Department’s subpoena comes about three weeks after the deal with Vivint, a takeover that drew the ire of billionaire investor David Tepper, was canceled. Vivint sued SunEdison shortly after, saying its officials had failed to meet financial obligations and work toward consummating the merger. SunEdison auditors had meanwhile started investigations into allegations made by former executives and a current employee about the accuracy of the company’s “anticipated financial position.”

‘Substantial Risk’

Ben Harborne, a SunEdison spokesman, declined to comment on Thursday. Representatives of Vivint and its majority owner, Blackstone Group LP, couldn’t be immediately reached for comment.

The company is on the verge of bankruptcy after a buying binge of wind and solar farms in 2014 and 2015. In a filing Tuesday, its TerraForm Global unit said “there is a substantial risk” that SunEdison would soon seek bankruptcy protection because of liquidity challenges.

At the same time it disclosed the Justice Department’s subpoena, SunEdison said it had received an inquiry from the U.S. Securities and Exchange Commission of a similar vein. The company said it’ll cooperate with both agencies.

Board Overhaul

In November, SunEdison overhauled the boards of both of its TerraForm companies, a move criticized by hedge fund manager Tepper. His Appaloosa Management LP said Friday it had increased its stake in TerraForm Power to 10.88 percent from 9.5 percent, and he sued to block the Vivint acquisition, saying it favored SunEdison shareholders over TerraForm.

The solar developer’s 2 percent convertible bonds maturing in 2018 rose 0.125 cent to trade at 3.625 cents on the dollar in New York on Thursday, when they last traded, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They’ve slid 98 percent since peaking in July. The company’s shares are down by virtually the same percentage, and slipped 20 percent to 43 cents at the close in New York Friday.

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