Although a Delaware court cleared a major obstacle standing the way of SunEdison's (SUNE) plan to acquire Vivint Solar (VSLR), it may be too soon to celebrate just yet. The judge left open the possibility of the case going to trial, according to a source close to the matter.
In January, David Tepper's Appaloosa Management filed a complaint against SunEdison, alleging that SunEdison breached its fiduciary duty to its yieldco, TerraForm Power (TERP) and its minority stakeholders in its plans to acquire Vivint in a deal which was initially announced for $2.2 billion in July. Terms of the deal were renegotiated downward in December but TerraForm Power would be required to pay SunEdison $799 million under the new transaction, according to a note released by J.P. Morgan Securities on Friday.
On Thursday, Judge Andre Bouchard denied the injunction, saying that it was not clear whether TerraForm Power faced imminent harm from the transaction becuase it appeared to have sufficient liquidity to operate through 2016, the source told Real Money. According the same source, the judge said he still had serious questions about the fairness of the transaction and opened of the possibility of the case going trial.
On Friday, David Tepper told Real Money that he was waiting for the release of the transcript from the ruling before making a decision on how to proceed.
SunEdison declined to comment beyond the following statement, which was released on Thursday: "We are gratified that the court denied the injunction and now we look ahead to continuing to navigate current market conditions."
Thursday's ruling by Judge Bouchard was not on the merits of the case, the source told Real Money, it was a ruling on whether there should be a preliminary injunction based on the "take or pay" agreement. (Such contracts, which are common in MLP or yieldco structures induce one party to take something from a supplier or pay a penalty. In the case of TerraForm Power, it could buy projects from SunEdison or pay a fee for not doing so.)
The complaint filed by Appaloosa states that SunEdison's planned acquistion of Vivint is unfair to TerraForm Power because it requires TerraForm Power to purchase Vivint projects under the take or pay arrangement. Vivint's portfolio of residential solar projects were called less creditworthy in the complaint and were also said to be incompatible with TerraForm Power's business.
"The purchase transaction was all about SunEdison using TERP as a personal piggy bank, and dumping ground for unwanted assets, in order to achieve SunEdison's business objectives," the complaint stated.
