• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Energy

SunEdison Creditors May Be Left Holding a Very Heavy Bag

SunEdison's main problem is simple, the details are tricky.
By CARLETON ENGLISH Apr 05, 2016 | 04:45 PM EDT
Stocks quotes in this article: SUNE

When Greenlight Capital's David Einhorn announced a long position in SunEdison (SUNE) in 2014, the hedge fund manager said the company had a "complicated financial situation but simple story." As the renewable energy company continues to falter, the reverse is true: SunEdison's financial situation is simple but its story is complicated.

Put simply, SunEdison took on too much debt too quickly. At the end of 2014, SunEdison had $6.9 billion in debt. Nine months later, at the end of the third quarter, SunEdison's debt rose 68% to $11.6 billion.

The story of SunEdison's debt, however, is decidedly more complicated, which could make matters difficult should the renewable energy company ultimately file for chapter 11 bankruptcy protection, as has been widely reported.

Representatives from SunEdison confirmed third quarter debt figures but declined to comment further.

At the end of the third quarter of 2015, SunEdison had $1.8 billion in senior, unsecured convertible notes. (SunEdison has not yet provided its financials for the fourth quarter, the most recent audited financial information is now more than six months old.) The notes are currently quoted for pennies on the dollar, according to data compiled by Thomson Reuters. While the notes are senior to some of SunEdison's other debts, they are not backed by collateral, which makes the ability of shareholders to recoup much of their investment in the event of a restructuring tenuous.

Perhaps as a sign of SunEdison's weakening financial position, when the company announced a $225 million offering of convertible notes in January, the notes were secured and the interest rate was 5%, which is more than double the weighted average interest rate of its existing notes.

The balance of SunEdison's $11.6 billion debt load consists largely of term loans, some of which were used to provide financing to SunEdison as it developed projects that would later be dropped down to its yieldcos. Many of these loans -- $8.6 billion, according to SunEdison's filing -- are held with little to no recourse to SunEdison. This means that in the event of default, creditors would only be able to go after the assets -- or, projects -- used as collateral for the loan.

As many of the projects are in development, creditors may find that the assets are of little value should SunEdison be forced to file for chapter 11 protection. SunEdison's creditors span Wall Street, with a combination of Deutsche Bank, Goldman Sachs, Macquarie Capital, KeyBanc and Wells Fargo frequently listed among the bookrunners on its loans. As the potentially toxic assets are spread across several large banks, no single bank is expected to bear the brunt of a default. That said, a default still wouldn't be pleasant for any of the creditors.

Most recently, Deutsche Bank was listed as the administrative agent as well as joint lead arranger and joint lead bookrunner on SunEdison's $725 million second lien credit facility, which was announced in January. The purpose of the facility was to pay off existing indebtedness and to cover general corporate purposes. Debtwire reported last month that SunEdison was talking to its creditors on these notes about securing debtor-in-possession financing. (Debtor-in-possession financing is typically used by companies that are in financial distress. The debt is typically senior to existing debt and other claims and it provides the troubled company with liquidity as it restructures.)

The reported talks are a slight departure from the slightly more optimistic tone SunEdison had with regard to its liquidity in the third quarter. It made the following statement in the filing with the SEC:

"While we continue to incur significant indebtedness to fund our operations and acquisitions and have significant pending obligations, we believe that the sources of liquidity ... will be sufficient to support our operations for the next twelve months, although various factors could affect our liquidity position, including changes in the anticipated timing and terms of pending and completed acquisitions and the availability of project capital."

If SunEdison's stock price is any indication, it appears that the company's timing couldn't have been worse.

(For more on SunEdison's financial struggles, check out this timeline.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from owning individual securities.

TAGS: Investing | U.S. Equity | Energy | Bankruptcy | Markets

More from Energy

Occidental Petroleum Continues to Target Higher Prices

Bruce Kamich
May 16, 2022 2:52 PM EDT

Here's our first price target and our long term objective.

Diamondback's FANGs Could Dull in the Short-Term

Bruce Kamich
May 13, 2022 9:30 AM EDT

Let's check out the charts of this oil producer.

Trading for a Bounce -- Not a Bottom

Peter Tchir
May 10, 2022 10:00 AM EDT

Here's my thinking on the Nasdaq, bonds, energy, commodities and crypto right now.

If You Insist on Trading This Brutal Market, Don't Get Lazy With Your Stops

Bob Byrne
May 10, 2022 8:30 AM EDT

That word of warning applies to ETFs and individual stocks such as Intercept Pharmaceuticals, which we outline a trading strategy for here.

American Electric Power Could Correct Lower

Bruce Kamich
May 10, 2022 8:07 AM EDT

Let's see what the charts and indicators look like.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • 08:51 AM EDT PAUL PRICE

    Advice From the Future...

  • 12:20 PM EDT PAUL PRICE

    A Blast From the Past Regarding Bitcoin

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login