(Reuters)
SunEdison, the largest renewable-energy firm in the world and the bane of Wall Street's existence since July, filed for bankruptcy on Thursday.
So story over, right? One for the books. A massive company with $11 billion in debt and an SEC investigation hanging over its head bites the dust.
Not exactly. SunEdison has creditors, and those creditors are going to want things. They also may want things that SunEdison doesn't want to give them.
That is the beginning of another story. Instead of watching a stock death drop, we may be about to watch a creditor grudge match.
And it's already becoming clear (at least a little bit) what creditors and SunEdison might be fighting over.
But first, a review
SunEdison's story is one of a company that grew too fast and burned way too much money in the process. According to the company's own bankruptcy documents, it created a financial structure that "required intensive capital in order to build."
That structure was introduced in 2014, when the company created two subsidiaries, called yieldcos, to manage the projects that it built assets for. They are called TerraForm Power (TERP) and TerraForm Global (GLBL), and while they are separate and publicly traded, SunEdison has incentive distribution rights (IDR) over them and retains a lot of management control.
Of course, to make sure that the yieldcos had projects, SunEdison had to grow. That took a lot of money.
SunEdison's stock started crashing in July, after it announced that it would try to acquire Vivint, a residential-solar company, for a 52% premium. That deal for residential assets deemed inferior to the commercial assets SunEdison usually acquired tipped investors off to the idea that SunEdison may not have as much cash as they thought.
That's also in part because it used take-or-pay agreements with its yieldcos to finance the deal. Basically the yieldcos would have to take on projects the parent made or pay a fee.
After that the stock fell, and the rest is the stock-price death drop we know today.
Cry about it
The litany of mishaps from July to now is long. There's the missed annual-report filing, the ultimately canceled Vivint deal (among a few), the missed debt payments, the embarrassing management shake-ups. Still, SunEdison plans to stay in business during its restructuring and has not included the yieldcos in any bankruptcy proceedings.
That said, you can see why yieldco shareholders might be a little upset about their arrangement with the parent. SunEdison gets a lot of cash from them legally and retains control. However, their interests might not always be aligned. (Like when SunEdison might want the yieldcos to buy a project they don't want.)