News that SunEdison is in talks with holders of its second-lien loans to fund a debtor-in-possession financing facility has spooked investors, causing the company’s shares to tank 25% by days’ end.
We have already covered news of SunEdison’s dramatic downward trend over the past 9 months, which has culminated in SunEdison (and its first yieldco, TerraForm Power) settling with Latin America Power for $28.5 million over the termination of a planned acquisition; Vivint Solar terminating its acquisition agreement with SunEdison due to “SunEdison’s failure to meet its obligations under the merger agreement” and then filing “action in the Court of Chancery of the State of Delaware suing SunEdison, Inc. over its willful breach of the merger agreement between Vivint Solar and SunEdison.”
A few days later SunEdison announced that it had missed the deadline to file its Q4’15 and 2015 financial reports due to an ongoing investigation and IT errors, and just this week TerraForm Global, SunEdison’s second yieldco, dedicated to emerging markets, announced that it was cancelling a 326 MW deal in Central America.
So it really should come as no surprise that investors reacted negatively to today’s leaked news that the company is in negotiations with holders of its second-lien loans to fund a debtor-in-possession (DIP) facility. This is according to Debtwire, by way of “two sources familiar with the matter.” The news was published on Tuesday, and by looking at the company’s shares, you can also see exactly when the news was leaked.
“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,” Axiom Capital analyst Gordon Johnson told Reuters.
The Motley Fool raises the next natural concern, that “SunEdison is veering closer to bankruptcy by the day.” With its financial statements for the fourth quarter and full-year 2015 still absent, and this latest news which suggests the company is even closer to being out of cash, it really feels as if it is only a matter of time before what was once the world’s leading and preeminent renewable energy developers has to file for bankruptcy.
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