SunEdison Yieldcos, TerraFrom Global and Terraform Power To Look For Strategic Alternatives

SunEdison

On April 21, 2016, SunEdison filed for reorganization under chapter 11 of the U.S. Bankruptcy Code.

TerraForm Global Inc and TerraForm Power Inc, two of the subsidiaries of the bankrupt solar company SunEdison Inc, said on Monday that they were going to look at strategic alternatives, which includes the sale of their whole business.

Shares of TerraForm Power went up by 3.4 percent to $13.49 during early trading, and TerraForm Global went up to $3.64, an increase of 7.4 percent.

According to the two companies on Monday, their strategy could involve replacing SunEdison as their sponsor through a negotiation of new sponsorship arrangements or assuming the existing sponsorship agreements of SunEdison.

Yieldcos, as the two companies are known, are subsidiaries that have renewable energy assets and are publicly traded. These assets include those that come from their parents or sponsors.

Some of the strategic alternatives that TerraForm Global and TerraForm Power are considering may require the approval of the companies’ stockholders with others requiring a measure of approval from the U.S. Bankruptcy Court for the Southern District of New York, according to the companies.

The bankruptcy of SunEdison in April did not include the yieldcos as both companies claimed that they have sufficient liquidity to operate and that their assets were separate from SunEdison and that the creditors cannot go after them.

After the bankruptcy, however, the two companies have been facing a number of problems. In April, they said that the bankruptcy of SunEdison “will present challenges” in terms of financing for certain projects.

In July, SunEdison said that it was aiming to sell its shares in TerraForm Global, a company that holds assets for renewable energy outside of the United States.

In order to prevent the sale of any of TerraForm Power’s Class A shares, the company implemented a shareholder rights plan in the wake of the announcement of Brookfield Asset Management Inc and hedge fund Appaloosa that they will jointly bid for the stake of SunEdison in the company.

Last month, SunEdison said that it is going to stop paying interest payments for yieldcos because of its Chapter 11 proceedings. According to the companies, the decision of SunEdison is invalid and the companies will be disputing the decision.

Both TerraForm Global and TerraForm Power have also yet to file their earnings report for 2015 as well as their first quarter report for 2016 after identifying material weaknesses with regards to internal controls of their financial reports due to SunEdison.

Both TerraForm Global and TerraForm Power released preliminary results for the second quarter ending June 30 on Friday.

The financial advisers of TerraForm Global are Centerview Partners, Greentech Capital Advisors and AlixPartners.

TerraForm Power’s financial advisers are Centerview Partners, Morgan Stanley and AlixPartners.

The legal counsel for both companies is Sullivan & Cromwell LLP.

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