SunEdison Shares Plunge as News of Debt Restructuring Leaks

Are there other options besides bankruptcy?

Battered renewable developer SunEdison's shares plunged almost 20 percent today as news of its talks with second-lien loan holders surfaced in reports from Debtwire cited by Bloomberg and Reuters. Two sources close to the deal report that lien holders have been approached about funding a debtor-in-possession financing facility and providing $300 million in new liquidity.  

The debtor-in-possession (DIP) loan discussions come after failed efforts by second-lien lenders to reach an out-of-court remedy for the firm's cash and debt dilemma, with Debtwire reporting that the investors include "those holding term loans of a total of $725 million."

According to Reuters' source, Axiom Capital analyst Gordon Johnson, "DIP negotiation means that the company has effectively run out of cash and they get to pay their creditors 'fair market value' for the secured assets versus the contracted value."

SunEdison is not commenting.  

Other bad SunEdison news of late included the firm again delaying the filing of its annual report on March 16. SunEdison YieldCo TerraForm Power also delayed the filing of its 2015 10-K report. 

According to an investor colleague, the lawsuits being collected by SunEdison from Vivint, TerraForm Global and others would best be dealt with in bankruptcy proceedings.   

GTM's recent reporting on the timeline of SunEdison's woes follows.

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We are witnessing the end, or perhaps the remaking, of SunEdison, briefly the world's largest renewables developer -- and now the destroyer of $10 billion in market value.

We've seen epic failure at Suntech, Solyndra and the like -- but this is in a different league.

In 2014, SunEdison jumped into deep YieldCo waters with TerraForm Power and TerraForm Global. The company made a series of large, questionable acquisitions in First Wind and Vivint, as well as a slew of lesser corporate additions.

SunEdison has not reached GAAP profitability in more than five years and lost almost $1 billion in the first three quarters of 2015. When SunEdison's stock was at its peak, the company raised debt rather than equity, and that debt load has returned with a vengeance.   

It takes a very special type of ineptitude to fail on such a massive scale in what is, by most metrics, a healthy, capital-rich, high-growth renewables market. Other comparable vertically-integrated solar companies with YieldCos such as First Solar and SunPower have managed their capital, acquisitions and personnel in a much more well-paced and judicious fashion. It's evident in their steady growth, global pipeline and more-than-occasional profits.

SunEdison April 2015 to now

SunEdison shares are at $1.78 today, and the company has a market cap of $560 million. Its shares peaked at over $32 in July 2015.

Base chart: Google Finance

SunEdison's tale of woe timeline

June 2014: The launch of SunEdison's first YieldCo, TerraForm Power.

Nov. 2014: SunEdison and TerraForm acquire wind developer First Wind for $2.4 billion.

July 2015: TerraForm Global, a YieldCo focused on investment in Africa and Asia, launches.

July 2015: SunEdison's $2.2 billion plan to acquire residential installer Vivint in cash, stock and notes does not delight investors. The stock price collapses upon the announcement.

Sept. 2015: CEO Ahmad Chatila sends a memo notifying employees of a 15 percent workforce cut. GTM's Stephen Lacey reports: "Sources within the company expressed worry and surprise that the cuts didn't impact the architects of the Vivint acquisition."

Dec. 2015: SunEdison revised the terms of its acquisition of Vivint.

Jan. 2016:

Feb. 2016:

March 2016:

Lawyers, suns and money

Rumors are rampant that SunEdison will file for bankruptcy this month. That might get it out of the Vivint deal, as well as pummel Vivint's stock price and prospects. Blackstone is a majority shareholder in Vivint Solar and holds convertible notes with SunEdison.

Since the "TerraForms" hold the finished projects, SunEdison's asset is really its development pipeline. Unfortunately, the Hawaiian Electric (HECO) and Latin America Power terminations "add to the concerns that SunEdison will not be able to continue developing projects," said equity analyst UBS, adding, "We have clear doubts that SunEdison will be able to hit the utility-scale and residential development targets for 2016, and we expect management to lower expectations in the near future."

What can SunEdison do in the meantime?

Could the company be sold and taken private? Well, there's the pressing matter of SunEdison's $11 billion debt load to be assumed by the new owner.

An investment banker colleague suggested that a Chapter 11 reorganization with a lesser debt load could be driven by Blackstone, a very interested party in this debacle deal.

S&P Capital IQ delivers a sober assessment: "While we would view a [Vivint] deal cancelation as a positive, it could result in more legal issues. In addition, SUNE has suspended preferred dividend payments, which we believe further illustrates SUNE’s highly constrained financial position. If SUNE cannot sell its existing assets, we see a greater probability for a liquidity crisis. We believe access to the debt and equity markets is elusive, given mounting issues."