A lot of bad and hidden stuff will be exposed during the hearing, and investors know that. It doesn't look good at all.
By Amrutha Gayathri and Arathy S Nair
(Reuters) - U.S. solar energy company SunEdison Inc , whose aggressive acquisition strategy has saddled it with almost $12 billion of debt, is at "substantial risk" of bankruptcy, one of its two publicly listed units warned on Tuesday.
A bankruptcy would rank among the largest involving a non-financial company in the past 10 years, according to bankruptcydata.com. SunEdison declined to comment.
SunEdison's shares - already reeling from a Wall Street Journal report on Monday that the company was being investigated for overstating its cash position - fell as much as 60 percent to a record low of 50 cents.
TerraForm Global Inc , one of two SunEdison "yieldcos", said in a regulatory filing that it would join its parent and fellow yieldco TerraForm Power Inc in delaying its annual report for the year ended Dec. 31. (http://1.usa.gov/22X8xDu)
However, the company said it did not rely substantially on SunEdison for funding or liquidity and that it would have sufficient liquidity to support its operations even if its parent sought bankruptcy protection.
TerraForm Global's annual report was due by March 30.
Yieldcos are publicly traded subsidiaries that hold renewable energy assets, including assets bought from their parents. They are backed by long-term power purchase contracts with utilities, allowing them to pay regular dividends.
TerraForm Global, whose shares fell as much as 23 percent to a record low of $1.92, said SunEdison may not transfer to it some solar energy projects in India, for which TerraForm Global has paid $231 million, and also may not complete other deals.
"If SunEdison does not perform under these agreements, it could have a material adverse effect on TerraForm Global," TerraForm Global said.
TerraForm Global's chief executive, Brian Wuebbels, is also SunEdison's chief financial officer.
Although solar project developers such as SunEdison continue to benefit from robust demand for solar energy, their shares along with those of other solar companies have been hit by investor concerns - largely dismissed by analysts - that demand could fall due to weak oil prices.
SunEdison, which is run out of Belmont, California, has problems of its own, however.
The company, which has delayed filing its annual report twice, said this month it had identified material weaknesses in its financial reporting controls.
According to a loan agreement filed with regulators, SunEdison could breach a covenant if it does not file its annual report within 90 days after the end of each fiscal year - in this case, March 30.
"The delivery of annual financials is required under their first lien credit facility as well as their second lien term loan," said Ian Feng, an analyst at credit research firm Covenant Review.
The company has at least $1.4 billion in first-lien and second-lien debt, according to filings.
SunEdison is also being investigated by the U.S. Securities and Exchange Commission to see if it had exaggerated its liquidity position, the Journal reported on Monday.
Is management aware of the stock price? They sure are not saying a word about it, while investors are loosing their life savings.
Choosing the DIP Lender
When faced with a cash-flow crisis and an inevitable insolvency filing, a debtor company can, at least in theory, look to two principal sources of DIP financing: its existing senior lender or lenders, or external lenders with no current stake in the company’s business. As discussed later in this chapter, the financing can, however, be provided by the debtor’s other existing stakeholders.3 On the surface, an existing lender with a financial stake in the outcome of the company’s restructuring would appear to be the most convenient source of DIP financing, since the debtor has an ongoing relationship with the existing lender and because the existing lender should have an understanding of the company’s business prospects, asset values and cash flow requirements. While the specialized third party DIP lenders have garnered a reputation for moving quickly in arranging loans, their inability to conduct extensive due diligence can often lead to a lower level of funds being available to the company, and materially higher fees being charged.
There are a variety of factors that will affect a debtor’s choice of (and ability to choose) the party that will become the DIP lender. The company’s existing relationship with its senior lender will invariably dictate the role that lender will take in the restructuring proceedings, be it DIP lender or not. Since most financial institutions (or syndicates of them) do not, on a regular basis, make DIP loans, or advance credit in situations where a borrower is already in default, existing lenders will have to be satisfied that there is a substantial business case for them to advance additional credit by way of DIP loan. The lender will first look at its existing collateral coverage and compare the likely outcome in a liquidation scenario (i.e. an immediate orderly shut down as opposed to a restructuring). If the lender’s position is clearly in a shortfall position in a liquidation scenario, then the lender will next h
Daytrading Market Analysis 3/21/16 – Weekly Penny Stock Pick
March 19, 2016 viaKristian 0 Comment analysis, broker, daytrading, money, stock market
Sunedison Inc (NASDAQ:SUNE)
a developer and seller of photovoltaic energy solutions, an owner and operator of clean power generation assets, and a developer and manufacturer of silicon wafers, has seen an uptrend on stock forums, chatrooms and message boards in recent days. This is due to the lucrative upside potential the company poses now.
SUNE is rebounding from it’s 52 week low at $1.21/share. This is a big surprise for a stock of this caliber to be this much undervalued as it’s 52 weeks high is just above $33.
This leads as to believe SUNE will NOT remain at this low levels for long, and this is supported by most big analysts. Here are some recent comments from brokerage firms on SUNE;
Bank of America restated a “neutral” rating and issued a $2.50 price target on shares of Sunedison in a report on Saturday.
FBR & Co. boosted their price target on Sunedison from $7.00 to $10.50 and gave the company an “outperform” rating in a report on Wednesday, March 9th.
Deutsche Bank restated a “positive” rating on shares of Sunedison in a report on Tuesday, March 8th. ●JPMorgan Chase & Co. lowered Sunedison from a “neutral” rating to an “underweight” rating in a report on Tuesday, March 8th.
First support level is resting at 2.03 with a second high resistance level established on 03/15/16 after market at 2.30. SUNE retracted from the bullish run the stock had 3/14/16 and has climbed to the major resistance point $2.13.
SUNE is a strong buy if entering next week above $2.13. With Earnings Report in 3 Days, we are watching this one very closely and will bring you more details and technical report as we get it.
Why I Don't Mind The Debt
The bears have had a big issue with Sunedison's debt. After all, the company owes nearly a billion dollars. However, I'm not quite as concerned about the debt as the bears are. The truth is that the debt SUNE owes is backed by tremendous amounts of assets. If needed, SUNE could simply sell its assets, pay off the debt, and have plenty of money to give investors an incredible return given the incredibly low price of Sunedison stock these days.
Another reason that I don't mind debt is that debt is part of running a business. The truth is that expansion is incredibly expensive, and even the biggest and best businesses in the world borrow money to expand. Sure, the interest SUNE pays is a bit high, but it's all part of business my friends. Ultimately, the money owed by SUNE gave them the ability to build such an incredible company in the first place. So, not only will they have no problem paying the debt off, if it wasn't for the debt, SUNE wouldn't be anywhere near as successful of a company as it is today.
The Bottom Line
The bottom line here is that SUNE is an absolutely incredible company. Sure, the company has quite a bit of debt, but the truth is that the debt isn't concerning to me and shouldn't be concerning to you. When it comes down to it, solar power is becoming even more popular than ever before, and because of the debt that SUNE has been willing to take on, the company has positioned itself to take a lion's share of this market. All in all, I'm incredibly impressed with Sunedison and see the recent declines as an opportunity to get in on future gains at a discount.
What Do You Think?