Published on March 30th, 2016 | by Joshua S Hill3
SunEdison In More Hot Water As SEC Investigation Begins & Bankruptcy Looms
March 30th, 2016 by Joshua S Hill
Once the world’s leading renewable energy developer, SunEdison’s fortunes have fallen like a rock, tied to a much larger rock, and are now facing the looming threat of bankruptcy.
SunEdison’s woes have already been well covered — from its numerous failing transactions, to missing its Q4 & 2015 filing deadline, to news of debt restructuring. This week, however, it’s only gotten worse, as the US Securities and Exchange Commission (SEC) has begun its own investigation into the company’s disclosures to investors about its liquidity. To make matters more complicated, SunEdison’s second yieldco, TerraForm Global, intended to deal solely with emerging markets, filed a report with the SEC warning of “a substantial risk that SunEdison will soon seek bankruptcy protection.”
News of the possibility that SunEdison had in some way misled its shareholders is not new — late in 2015 the Audit Committee initiated an investigation based on allegations made by former executives of the company concerning “the accuracy of the Company’s anticipated financial position.” However, according to The Wall Street Journal, officials in the SEC’s enforcement unit have apparently begun investigating SunEdison’s disclosures to investors, looking into whether the company overstated its liquidity last year when the company announced that it had $1 billion in cash.
This news was paired with a separate SEC filing made by TerraForm Global on Tuesday, advising “that the filing of their Annual Report on Form 10-K for the fiscal year ended December 31, 2015 will be delayed” beyond the deadline. This is due in large part to the fact that TerraForm Global relies on SunEdison’s own same-filings to be made to appropriately determine their own financial status, but according to the filing:
“SunEdison has not performed as obligated under the Management Services Agreement, in particular with respect to financial reporting and control matters. Additionally, SunEdison has not or may not be able to perform under other agreements, including agreements with respect to the pending contribution of the projects in Uruguay and India, which were part of TerraForm Global’s IPO portfolio, and the pending dropdown of the additional India project portfolio aggregating 425 MW purchased by TerraForm Global, LLC (“Global LLC”) in the fourth quarter of 2015.”
Furthermore, TerraForm Global stated outright in its filing that, “due to SunEdison’s liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection.”
Such a move would have a massive impact on TerraForm Global (not to mention the company’s other yieldco, TerraForm Power), however the company is still confident that, in the event SunEdison seeks bankruptcy protection, “TerraForm Global will have sufficient liquidity to support its ongoing operations.”
Unsurprisingly, TerraForm Global’s shares plummeted 19% in the wake of the company’s SEC filing.
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