Solar developer SunEdison bankrupt as aggressive growth plan unfolds

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(Reuters) – SunEdison Inc. SUNE.Nonce America’s fastest-growing renewable energy company, filed for Chapter 11 bankruptcy Thursday after a short-lived but aggressive wave of debt-fueled acquisitions proved unsustainable.

The SunEdison headquarters is shown in Belmont, California in this file photo from April 6, 2016. REUTERS/Noah Berger/Files

In its bankruptcy filing, the company said it had assets of $20.7 billion and liabilities of $16.1 billion as of September 30.

SunEdison’s two publicly traded subsidiaries, TerraForm Power Inc. TERP.O and TerraForm Global Inc. GLBL.O, are not part of the bankruptcy. In a statement, the companies, known as yieldcos, said they had sufficient cash to operate and their assets were not available to meet claims from SunEdison’s creditors.

The bankruptcy “will present challenges, however,” including with financing deals for some projects, the yieldcos said.

The Chapter 11 filing ends SunEdison CEO Ahmad Chatila’s seven-year quest to turn a struggling silicon wafer maker into a renewable energy giant capable of capitalizing on growing demand for solar and wind power. amid growing concerns about climate change.

Chatila was named CEO of what was then called MEMC Electronic Materials in 2009 and almost immediately bought out young solar project developer SunEdison. The company changed its name four years later and embarked on a rapid expansion that included entering new businesses like wind and energy storage and taking on projects around the world. This growth has racked up billions of dollars in debt.

Solar industry watchers said the bankruptcy was not a reflection of the sector, which is growing rapidly.

“SunEdison had a much different track record than any other solar company,” said Shayle Kann, senior vice president and renewable energy research firm GTM Research. “The projects themselves are good. They just bought too much to quickly.

The company said it secured up to $300 million in new financing from its first and second tier lenders, which are subject to court approval. The money will be used to support SunEdison’s operations during its bankruptcy.

“Our decision to initiate a court-supervised restructuring was a difficult but important step in addressing our immediate liquidity issues,” said Ahmad Chatila, CEO of SunEdison.

He said the company plans to use Chapter 11 to reduce debt, get rid of non-essential operations and take steps to get the most out of its technology and intellectual property.

SunEdison asked the bankruptcy court to appoint an independent reviewer to review recent transactions. Although he said he was unaware of any specific wrongdoing, he cited a US Department of Justice subpoena related to a fundraising event, a US Securities and Exchange Commission investigation and legal action brought by TerraForm Global in its petition.

He asked that the investigation begin immediately and be completed within 60 days, a short time frame compared to independent reviews in bankruptcies such as Caesars Entertainment Corp’s operating unit. CZR.Owhich lasted 12 months with costs exceeding $40 million.

SunEdison said the Examiner’s budget should not exceed $1 million.

SunEdison shares were halted and last traded at around 34 cents on the New York Stock Exchange. Shares of the company were trading as low as $33.44 in July 2015. Shares of First Solar Inc. FSLR.O slightly closed and shares of SolarCity Corp SCTY.O rose 3.7% at the end of the session. An index of solar stocks .SUNIDX gained 0.7%.

Major SunEdison shareholders include OppenheimerFunds Inc with an 11.9% stake, BlackRock Inc BLK.N with a 6.5% stake, The Vanguard Group with a 6.4% stake and Adage Capital Partners GP LLC with a 5.4% stake, according to court documents.

Hedge fund Greenlight Capital, led by David Einhorn, announced earlier this week that it had sharply reduced its stake in SunEdison. Greenlight, which won a seat on the company’s board earlier this year, declined to comment on the bankruptcy.

Investors began to lose faith in SunEdison’s supercharged expansion last summer, when the company announced a $2.2 billion deal to acquire rooftop solar installer Vivint Solar Inc. VSLR.N. At the time, renewable energy stocks were under pressure, in part because falling oil prices raised concerns about demand for alternative energy sources.

The Vivint deal sparked litigation involving SunEdison’s yieldcos, the listed subsidiaries that own and operate renewable energy assets, many of which were acquired from SunEdison.

Billionaire David Tepper’s Appaloosa Management has filed a lawsuit to stop TerraForm Power from buying certain Vivint assets. Appaloosa is also seeking to overhaul TerraForm Power’s conflicts committee, saying the company’s majority shareholder, SunEdison, has breached its fiduciary duties.

Tepper was not immediately available for comment.

In March, Vivint terminated the cash and stock deal after SunEdison failed to complete the planned acquisition. Shares of Vivint rose 4.9% on Thursday.

SunEdison is also under investigation by the US Department of Justice and the US Securities and Exchange Commission over the failed Vivint Solar deal and other issues.

SunEdison is also being sued by TerraForm Global, its other yieldco, for breach of contract, alleging that SunEdison misappropriated $231 million of TerraForm’s cash.

The company has delayed filing its annual report twice after identifying material weaknesses in its financial reporting controls.

The case is in the United States Bankruptcy Court, Southern District of New York, Case No.: 16-10992

Additional reporting by Arathy S Nair in Bengaluru and Tracy Rucinski in Chicago

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