Bankruptcy May Be Best Option For SunEdison (SUNE.N)

U.S. solar energy company SunEdison Inc. is at “substantial risk” of bankruptcy, according to a warning from one of its two publicly listed units. SunEdison had debt of $7.9 billion as of Sept. 30, excluding its yieldcos, and cash and cash equivalents of $1.3 billion. If it goes forward, the bankruptcy would be one the largest involving a non-financial company in the past 10 years.

Earlier this month, SunEdison said it had identified material weaknesses in its financial reporting controls. On Monday, the Wall Street Journal reported that the company was being investigated for overstating its cash position. The company is being investigated by the U.S. Securities and Exchange Commission to see if it had exaggerated its liquidity position.

SunEdison has delayed filing its annual report twice now. According to a loan agreement filed with regulators, SunEdison could breach a covenant if it does not file its annual report within 90 days after the end of each fiscal year, which would be March 30 in this case.

TerraForm Global Inc, one of two SunEdison yieldcos, said in a regulatory filing that it would need to delay its annual report for the year ended Dec. 31. TerraForm Global’s annual report was due by March 30. The unit said SunEdison may not transfer to it some solar energy projects in India, for which it has paid $231 million. Other deals also may not be completed. TerraForm Global shares fell as much as 23 percent, dropping to a record low of $1.92, after the announcement.

TerraForm Global is a legally separate company and would not follow SunEdison into bankruptcy. However, a SunEdison bankruptcy would still negatively affect TerraForm Global’s business. The unit says that it would sufficient liquidity to support its operations in a worst case scenario for SunEdison, but it also says that it is in talks with lenders of its revolving credit facility.

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