SunEdison (SUNE) creditors are about to be compensated with shares of TerraForm Power (TERP), according to a recent filing.
On Wednesday, SunEdison announced that it plans extinguish $336 million of notes coming due in 2020. Existing noteholders will get shares of SunEdison's yieldco, TerraForm Power, as well as equity interest in specific TerraForm Power projects that are scheduled to be transferred in 2016. SunEdison did not immediately respond to requests to comment.
The transaction comes at an interesting time: Many analysts and investors have questioned SunEdison's financial and operational management, as the company's stock has fallen 73% this year. Activist investor David Tepper, of Appaloosa Management -- who took a 9.25% stake in the yieldco in early December -- raised concerns about SunEdison's influence over TerraForm Power earlier this month.
Brian Wuebbels, SunEdison's CFO, said in a statement announcing the transaction: "We believe this was a mutually beneficial solution to deleverage our balance sheet by selling our under-development assets as well as the Company's shares of TerraForm Power."
Wuebbels also serves CEO of SunEdison's yieldcos, TerraForm Power and TerraForm Global (GLBL). He assumed the roles in November as part of several other changes to the Board and management structure of both companies. The changes prompted several of Board members of the Conflicts Committee to resign thee day the changes were announced.
It was after the Board and management changes, coupled with TerraForm Power changing its outside counsel to Greenberg Traurig from Cleary Gottlieb Steen & Hamilton, that Tepper began to vocalize his concerns about the family of companies, and later demanded to review company records.
However, it is SunEdison's financial standing that has some analysts worried.
"The vultures are circling," Gordon Johnson of Axiom Capital Management said of SunEdison's creditors, in an interview with Real Money on Wednesday morning. "[SunEdison] is essentially giving away their assets to 2020 debt holders."
In a note sent later on Wednesday morning, Johnson said the transaction makes it appear that SunEdison is becoming "desperate for cash."
"When looking at SUNE/TERP's equity risk, we see today's transactions as of considerable concern," Johnson wrote in Wednesday's note. "With the asset sales today to 2020 debt holders, SUNE is giving away the underlying items that were the impetus for owning the stock."
So far, it doesn't appear that the New Year will bring an end to the drama in the SunEdison family.