The stock market and SunEdison shareholders are moving past the denial and bargaining phase of grief and coming to accept the harsh reality of a SunEdison bankruptcy.
SunEdison stock continues its epic collapse, settling at a new low of 24 cents per share in after-hours trading this weekend, upon reports from The Wall Street Journal that the beleagueredsolardeveloper intends to file for Chapter 11 bankruptcy protection this month.
Bankruptcy is not a surprise to anyone that's been watching closely -- but the actuality of the human and financial scale of this implosion is breathtaking.
According to anonymous sources, the firm is in talks with two creditors to gain operating cash to keep the company alive during the bankruptcy filing period.
The WSJ reported that creditors including senior bank lenders led by Deutsche Bank "are likely to take control of the company and its portfolio of power projects." Another group of creditors includes the hedge funds that joined in a $725 million junior-debt offering earlier this year.
Here's a review of SunEdison's disastrous March.
- SunEdison delayed its 2015 and Q4 financial report to deal with two internal investigations into the accuracy of its financial disclosures.
- Goldman Sachs, Barclays, Citigroup and UBS, the banks loaning SunEdison ~$2 billion for its Vivint acquisition, “have balked at providing [the] loans” according to the WSJ.
- Vivint Solar withdrew from SunEdison acquisition.
- SunEdison and TerraForm Power announced a $28.5 million settlement and termination of the Latin America Power acquisition.
- SunEdison and TerraForm again postponed filing 2015 financials.
- The SEC is looking into whether SunEdison actually had $1.4 billion cash as it reported in November last year or if the company misrepresented its cash position.
- In early March, SunEdison's long-time CFO Brian Wuebbels left that role to join YieldCos TerraForm Power and TerraForm Global as CEO. Last week, Wuebbels, one of the architects of SunEdison's current dilemma, resigned as president, CEO and as a member of the board of directors. According to a release, TerraForm's board has formed an office of the chairman, led by Peter Blackmore, chairman of the firm, to lead TerraForm Power on an interim basis.
- The DOJ is looking into transactions between SunEdison and its YieldCos
What will the bankruptcy look like, and what about the TerraForms?
As the WSJ reports, "A SunEdison bankruptcy filing would be problematic for its two YieldCos." Although the YieldCos "are in far better financial shape than SunEdison," they depend on SunEdison "for many services." The YieldCos "don’t plan to file for bankruptcy protection, but their shares represent much of SunEdison’s value."
How would the YieldCos operate as independent entities? SunEdison’s stakes in the TerraForms are already attracting interested bidders, according to reports.
An industry expert looks ahead to how this will play out:
"SunEdison will have [debtor-in-possession] financing in place. They file a bankruptcy to prevent actions by creditors. I would guess they have a plan for orderly disposition of some assets (which might otherwise have been blocked by creditors if terms were unfavorable). They will want to hang on to development assets and have a plan for continuing the business around those assets and related business. Equity and debt will fight in bankruptcy, but it looks like the equity is worthless. The debt will be held by 'opportunity' firms that will buy up bonds/other debt at a discount, and will argue for an alternative plan; maybe they see more value in current sale of all assets versus continuing business. They will have done various liquidation scenarios -- their interest is in making money off of the bonds, not in saving SunEdison."
There are some winners amidst the rubble: "Given the complexity of the SunEdison financings, I can see this bankruptcy taking a while to sort out. Lawyers will make a lot of money."