SunEdison's Chatila Still CEO of Complicated Clean-Energy Giant

  • Two-thirds of CEOs gone by time companies file bankruptcy
  • `It just may not be that easy to find a new CEO' for SunEdison

The complicated beast that Chief Executive Officer Ahmad Chatila created at SunEdison Inc. may be part of the reason he’s still there even after the world’s largest clean-energy developer filed for bankruptcy last week. It may not protect his job for long.

Chatila led the company through a two-year, $3.1 billion acquisition spree that spanned six continents, and he oversaw the creation of two publicly traded yieldco units while racking up $16.1 billion in liabilities. That sprawling empire would be a challenge for any new CEO to oversee as the Maryland Heights, Missouri-based company seeks to reorganize through Chapter 11.

“It just may not be that easy to find a new CEO,” said B. Espen Eckbo, a finance professor at Dartmouth College’s Tuck School of Business.

Chatila is one of the few people with a detailed understanding of SunEdison’s expansive operations, and that expertise is still needed, at least for now.

“This could be a case where the CEO has special knowledge that would be useful to the new bosses,” said Steven Azarbad, chief investment officer Maglan Capital LP, a New York-based hedge fund that focuses on distressed assets. He held shares in SunEdison for about four months, until its planned $1.9 billion acquisition of Vivint Solar Inc. fell apart in March.

‘Hang Around’

“Sometimes they get to hang around and give the keys to the shop, but that’s not necessary,” Azarbad said. “Eventually, the CEO is going to go.”

About two thirds of the time, the CEO is gone by the time a company seeks bankruptcy protection -- either forced out by creditors or board members, or stepping down by choice, according to a December study by finance professors at Dartmouth and Queen’s University in Canada.

Once a company lines up Debtor In Possession financing, as SunEdison did with a $300 million loan last week, the CEO’s departure becomes even more likely, according to Eckbo, a co-author of the report.

“With DIP financing, there’s a higher likelihood the CEO will go,” Eckbo said.

Ben Harborne, a SunEdison spokesman, declined to comment.

Project Portfolio

SunEdison’s portfolio of wind and solar farms under development has value, and some creditors may expect Chatila will be able to get the most for them, according to Gordon Johnson, an analyst at Axiom Capital Management.

“The equity investors who are also in the debt think these assets still have value,” Johnson said in an interview. “I think that’s why Chatila is still in his seat.”

Chatila remains on the board of one of SunEdison’s two yieldcos, TerraForm Power Inc., which is controlled by SunEdison and trades separately. Both TerraForm Power and its sister company TerraForm Global Inc. own operating power plants developed by SunEdison and lenders may want to hold on to Chatila’s institutional knowledge of the complicated interrelated companies.

The odds are against Chatila remaining with SunEdison. By the end of a restructuring, more than 80 percent of CEOs have left, according to Dartmouth’s Eckbo.

“These are basically broken companies,” Eckbo said. “It’s as if there’s a new sheriff in town, and the old guy probably should have been fired a long time ago.”

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