Investors had a swift and emphatic response to a report on Friday that SunEdison Inc was preparing to file for bankruptcy protection: Sell.
The Wall Street Journal reported after US markets closed on Friday that SunEdison — the world’s largest renewable-energy company — is in talks with two creditor groups for a loan to tide it over during the process.
The newspaper cited unidentified people familiar with the matter.
SunEdison’s shares changed hands at US$0.235 in heavy after-hours activity on Friday evening, down 45 percent from US$0.43 at the end of regular trading on the New York Stock Exchange, which was the lowest since the company went public in July 1995.
The prospect of bankruptcy protection has shadowed SunEdison for weeks, after the company spent more than US$3 billion since the start of 2014 buying wind and solar projects on six continents and accumulating US$11.7 billion in debt.
TerraForm Global Inc, a public yieldco holding company of wind and solar farms that SunEdison founded and controls, disclosed this week that its parent might be on the verge of seeking bankruptcy protection.
“Due to SunEdison’s liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection,” TerraForm said in a filing on Tuesday.
SunEdison has twice delayed filing last year’s annual report, citing a “material weakness” in its internal accounting system and an internal inquiry into its financial position.
The delays put the company at risk for technical defaults on at least US$1.4 billion in loan and credit facilities. The loans and credit lines require the company to file the report within 90 days of the end of its fiscal year.
Creditors would probably take control of SunEdison and its power projects, the Wall Street Journal reported on Friday, citing people familiar with the situation.
While the company has held meetings with creditors to negotiate a loan to see it through a Chapter 11 filing, competition for the deal among lenders has delayed an agreement, the report said.
On one side are bank lenders led by Deutsche Bank AG, the report cited the people as saying; on the other are a group of creditors, mainly hedge funds focused on distressed companies, that participated in a junior-debt offering in January that raised about US$725 million, the report said.
A bankruptcy filing would be problematic for TerraForm and another SunEdison yieldco, TerraForm Power Inc, the report said. The yieldcos, it said, are in far better financial shape than SunEdison — their wind and solar farms sell power to utilities under long-term contracts — but depend on the company for many services.
David Tepper’s Appaloosa Management LP disclosed in a filing on Friday that it had boosted its stake in TerraForm Power to 10.88 percent from 9.5 percent.
The yieldcos do not plan to file for bankruptcy protection, but their shares represent much of SunEdison’s value, the report said.
In recent months, bidders have inquired about purchasing SunEdison’s stakes in one or both of the TerraForm entities, the report said, citing people familiar with the conversations.
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