Another day, another lawsuit for SunEdison (SUNE). On a somewhat awkward note, this one is courtesy of its yieldco, TerraForm Global (GLBL).
On Friday, TerraForm Global filed suit against SunEdison and several of its executives, including CEO Ahmad Chatila and former CFO Brian Wuebbels, in Delaware's Court of Chancery. The suit calls out SunEdison for breach of fiduciary duty and misappropriation of $231 million.
Representatives for SunEdison declined to comment on pending litigation. Representatives for TerraForm Global declined to comment beyond the details listed in the lawsuit.
TerraForm Global's suit comes almost a week after it said in a filing with the Securities and Exchange Commission that there was "substantial risk" that SunEdison would seek bankruptcy protection.
The suit alleges that SunEdison diverted $231 million from TerraForm Global to "prop up its flagging liquidity position" instead of funding renewable energy projects in India that were expected to be dropped down to the yieldco.
In October, SunEdison told TerraForm Global that it had a short-term need for cash and asked TerraForm Global to provide funding for in-process projects in India, the suit said. (To be sure, the nature of the relationship between SunEdison and its yieldcos was such that the yieldos would purchase projects from their parent.) In this case, however, TerraForm Global did not feel that the projects were ready to be "dropped down," which means early financing could have put TerraForm Global at risk.
Around the time that SunEdison requested advanced funding from TerraForm Global, it had made statements in SEC filings that suggested its liquidity position was strong. Meanwhile, in November, TerraForm Global learned that SunEdison needed to quickly pay a $100 million margin loan that came due after the stock of its other yieldco Terra Form Power (TERP), which was used to secure the loan, declined.
On Nov. 19, SunEdison's board called for meetings of TerraForm Global and TerraForm Power's boards to be held Nov. 20. The suit states that CEO Chatila did not circulate an agenda or notify the secretaries of the yieldcos' boards.
The meeting that followed was referred to as the "Friday Night Massacre," in a separate suit against SunEdison, led by Appaloosa Management, which holds a 10.9% stake in TerraForm Power. The meeting saw sweeping changes to the conflicts committees of both yieldcos.
For TerraForm Power, the new committee allowed for a swift decision in SunEdison's controversial -- and now failed -- plans to purchase Vivint Solar (VSLR). For TerraForm Global, the new committee quickly approved a $150 million pre-payment for the India projects, with the remaining $81 million to follow soon thereafter. The funds left TerraForm Global's account moments after the newly formed conflicts committee met.
The suit alleges that the new conflicts committee received a biased explanation from SunEdison for why the funds were needed, which also left out SunEdison's liquidity concerns. The suit also says that SunEdison used those funds to repay the margin loan moments after the meeting was held, instead of being used to finance the India projects.
TerraForm Global's suit also said that as of February 2016, lenders for the India projects refused to transfer the India projects to TerraForm Global from SunEdison due to unpaid bills and equity funding gaps.
The TerraForm Global suit is just another one of many mounting against the troubled renewable energy company. Not to mention the other troubles SunEdison faces as its stock has fallen below $0.25 on Monday amid reports from the Wall Street Journal that it was preparing to file for chapter 11 bankruptcy protection.
SunEdison is also the defendant listed in an amended suit filed last week by Appaloosa Management, which calls for an overhaul of TerraForm Power's board in an effort to restore sound corporate governance at the yieldco.
Cobalt Partners and Glenview Capital also filed suit against SunEdison for making "untrue statements of material fact" and other material omissions in offering documents which were used for SunEdison and TerraForm Global to raise $2.5 billion between June 2015 and August 2015. The suits were filed in a California superior court.
SunEdison also received a subpoena from the Justice Department last week tied to its failed acquisition of Vivint Solar and other concerns about its financial dealings. The SEC is also investigating SunEdison on similar grounds.
Amid legal troubles and liquidity concerns, the lights may soon be out for SunEdison.
For more on SunEdison's financial struggles, check out this timeline Real Money prepared.
