SunEdison on Verge of Bankruptcy?
SunEdison Inc (NYSE:SUNE) stock is on the verge of bankruptcy. At least, that’s what some analysts are worried about after the U.S. Securities and Exchange Commission (SEC) launched a probe into the company on Tuesday.
SUNE stock downwardly breached the $1.00 barrier on Tuesday for the first time since the renewable energy firm went public in 1995.
SunEdison’s yieldco, TerraForm Global Inc (NASDAQ:GLBL), said in a filing that there is “a substantial risk” that SunEdison, which is struggling under a huge debt load, will file for bankruptcy soon.
“SunEdison has not performed as obligated” with respect to financial reporting, and has also not been able to contribute to projects in Uruguay and India, TerraForm said in a recent filing. “In addition, due to SunEdison’s liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection.” (Source: “SunEdison’s stock plunges after TerraForm warns of bankruptcy risk,” MarketWatch, March 29, 2016.)
TerraForm Global said it would join its parent and fellow yieldco, TerraForm Power Inc (NASDAQ:TERP), in delaying its annual report for the year ended December 31.
TerraForm Global’s annual report was due by March 30. (Source: “SunEdison at risk of bankruptcy, unit says; shares plummet,” Reuters, March 29, 2016.)
Yieldcos are publicly traded subsidiaries that own renewable energy assets, including assets purchased from the parent company.
TerraForm Global said SunEdison may not transfer to it 425 megawatts of solar energy projects in India, for which TerraForm Global has paid $231 million, and also may not complete other deals. (Source: Ibid.)
TerraForm Global’s “friendly fire” came in the wake of a Wall Street Journal report suggesting the SEC is investigating SunEdison’s disclosures about how much cash it had on hand. Citing people familiar with the matter, The Wall Street Journal said officials in the SEC’s enforcement unit are looking into whether SunEdison overstated its liquidity last fall when it told investors it had more than $1.0 billion in cash.
SUNE stock plunged 60% to $0.50 at 11:30 a.m. in New York on Tuesday, as investors got more worried that SunEdison is on the verge of bankruptcy. The SunEdison stock is down 88% this year after trading at a five-year peak of $31.00 last July and an all-time high of $91.00 in 2007.
Last month, SunEdison delayed filing its annual financial statements, pointing to concerns raised by unnamed current and former employees about the “accuracy of the company’s anticipated financial condition.” In a regulatory filing, the company said its board was looking into the matter and that the company could “be required to reassess [its] liquidity position.” (Source: “SEC Investigating SunEdison’s Disclosures to Investors About Its Liquidity,” The Wall Street Journal, March 28, 2016.)
Earlier this month, the Maryland Heights, Missouri-based company said it had found “material weakness in its internal controls over financial reporting,” but that it had not yet identified any material misstatements.
SunEdison’s aggressive acquisition strategy has saddled it with more than $11.0 billion of debt. Vivint Solar Inc (NYSE:VSLR) scrapped a deal to be bought by SunEdison this month, citing concerns about SunEdison’s finances.
SunEdison had also stopped paying some contractors and suppliers by the end of 2015 and was scrambling internally for ways to raise cash, reported The Wall Street Journal.