SunEdison Slides Into Bankruptcy Protection (NYSE:SUNE)

Thursday morning, reports emerged that renewable energy firm SunEdison has filed for Chapter 11 bankruptcy protection in Manhattan federal court in New York. In its bankruptcy filing, SunEdison lists $20.7 billion in assets and $16.1 billion in liabilities. The bankruptcy filing does not include its two subsidiaries, TerraForm Power and TerraForm Global.

In its bankruptcy plan, SunEdison said that it would sell “non-core” assets and shed debt through a reorganization. SunEdison reported securing $300 million in bankruptcy debt financing to maintain operations and continue paying employees. According to a statement from the company, the financing is being supplied by a group of first- and second-lien lenders. The financing deal still requires court approval before it can be enacted.

The SunEdison bankruptcy would be the biggest U.S. bankruptcy so far this year. Unfortunately, it is unlikely to be the last bankruptcy filing from the energy sector. Energy companies of all types are succumbing to the sustained slump in oil and commodity prices. Coal producer Peabody Energy Corp. filed for bankruptcy protection earlier this month, reporting $10.1 billion in liabilities.

The bankruptcy filing has come right after a two-year, $3.1 billion acquisition binge by the company. In 2014, SunEdison began buying up wind and solar projects on every continent except Antarctica. The company accumulated debt so quickly during that binge that it quickly rose to an unmanageable level, leading many investors to shed their shares.

Last July, SunEdison made a $2.2 billion bid to acquire Vivint Solar at a 52 percent premium. It would have been SunEdison’s biggest deal to date. However, investors started questioning the company’s business model and the transaction was delayed. The deal was first renegotiated down to $1.9 billion, then collapsed in March after the financing package was withdrawn.

SunEdison also recently came under scrutiny by the U.S. Justice Department for its accounting practices. A probe by the SunEdison board concluded that executives had reported an “overly optimistic” financial prognosis but there were no “material misstatements” and they committed no fraud.

The bankruptcy move had been widely expected. The company repeatedly failed to deliver on energy projects it had promised. TerraForm Global has sued its parent company over a power deal in India that collapsed.

SunEdison’s revenue hit a full-year high of $2.7 billion in 2011 and dipped to $2.5 billion in 2014, the latest complete year of results available. The company’s market capitalization peaked at $17.5 billion in November 2007. Its largest shareholders are OppenheimerFunds (11.9%), BlackRock (6.5%), Vanguard Group (6.4%) and Adage Capital Partners (5.4%), according to a court filing.

 

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