Another Green Energy Fraud
Wall Street Journal -by PEG BRICKLEY and LIZ HOFFMAN
Solar-power company SunEdison Inc. filed for bankruptcy protection on Thursday, pledging to curb a debt-fueled global expansion that pushed the company’s stock to great heights before fueling its rapid collapse.
The filing caps a dramatic decline for a company that was worth nearly $10 billion last summer, when it nurtured plans to become a global clean-energy giant. SunEdison used a combination of financial engineering and cheap debt to buy up renewable-power projects around the world before the market turned sour last summer and investors soured on its business model.
SunEdison said it would use the bankruptcy process to reduce its borrowings, which stand at more than $16 billion, including the debt of two publicly traded subsidiaries, TerraForm Power Inc. and TerraForm Global Inc. Those subsidiaries—separate entities known as yieldcos that buy operating projects from developer SunEdison and pay out cash flow to their shareholders—didn’t file for bankruptcy and said in statements that they have sufficient liquidity to continue to operate, though much of SunEdison’s value is derived from its controlling stake in them.
SunEdison listed assets of $20.7 billion in court papers.
“Our decision to initiate a court-supervised restructuring was a difficult but important step to address our immediate liquidity issues,” said Chief Executive Ahmad Chatila. “The court process will allow us to right-size our balance sheet and reduce our debt.”
The company secured commitments for up to $300 million in loans to see it through bankruptcy from a consortium of existing first- and second-lien lenders.
A Page One article in The Wall Street Journal last week chronicled SunEdison’s swift rise and fall. The company and its yieldco units borrowed heavily and sold stock to buy solar installations and wind farms in far-flung locations.
SunEdison spent more than $18 billion on acquisitions and raised $24 billion in debt and equity between 2013 and 2016, according to a filing on Thursday with the U.S. Bankruptcy Court in Manhattan.
“At its core, [SunEdison’s] business is a ‘deal-making’ one,” Patrick Cook, a senior SunEdison official, said in the filing.
The company’s ambitious growth under Mr. Chatila eventually caught up to it when markets turned sour last summer. Shares tumbled, lenders balked and cash dwindled. SunEdison failed to close many of its signed deals, including the $1.9 billion takeover ofVivint Solar Inc. and the $700 million buyout of Latin America Power.
The company’s shares have lost 99% of their value in the past 12 months.
The Securities and Exchange Commission and the Justice Department are investigating, among other things, whether SunEdison was honest with investors about the depth of its financial woes as its shares were tumbling, according to SunEdison’s regulatory filings and people familiar with the matter.
SunEdison is slated to make its first appearance in bankruptcy court Friday, where it will ask Judge Stuart M. Bernstein for permission to pay employees, among other routine bankruptcy requests.
SunEdison also is expected to ask the judge to appoint an independent investigator, known as an examiner. Such requests are common in bankruptcy, but they are typically made by a company’s creditors.
Write to Peg Brickley at peg.brickley@wsj.com and Liz Hoffman atliz.hoffman@wsj.com
http://www.wsj.com/articles/sunedison-files-for-chapter-11-bankruptcy-protection-1461247026