SunEdison sees life post-bankruptcy, creditors contest value

SunEdison Inc. sees a possibility for life after bankruptcy even as its unsecured creditors have threatened to upend a reorganization plan.

The clean energy giant, which said after its April bankruptcy that it was toggling between a wind-down or a reorganization, announced the rough terms of a restructuring on Tuesday. Its unsecured creditors have said they intend to dispute a settlement that’s key to the plan at an upcoming trial however, raising questions about whether the company added any value for its business or lenders after a year in Chapter 11.

The SunEdison plan, which comes after the piecemeal sale of more than $1 billion of assets including wind and solar farms, would split the company into a new, publicly traded unit and a trust to pursue lawsuits. It’s ability to pull off the reorganizing still hangs in the balance, hinging on Brookfield Asset Management Inc.’s deals to buy its two yieldcos, which in turn rests on a settlement that still needs court approval.

“They’re not coming back as anything material, just the rump or shadow of their former self,” Swami Venkataraman, a New York-based analyst at Moody’s Investors Service, said in an interview Wednesday, noting the significant whittling down of the company through major sales such as that to a unit of NRG Energy Inc.

Representatives of Maryland Heights, Missouri-based SunEdison and Toronto-based Brookfield declined to comment.

Creditor Repayment

Common stock in a new, reorganized SunEdison, any proceeds from the trust, money from some of the sales it has made during bankruptcy, and cash from a rights offering and the Brookfield deal — which would net more than $800 million for SunEdison — will all be used to repay creditors, according to a so-called disclosure statement filed in Manhattan bankruptcy court Tuesday. The statement outlines terms of a plan so that creditors can vote on it.

Brookfield, Canada’s biggest alternative-asset manager, said this month that it would acquire all of one yieldco, TerraForm Global Inc., and in a separate deal expand its stake in TerraForm Power Inc. to 51 percent. SunEdison could reorganize around any remaining shares in TerraForm Power, as well as the cash it gets from the sale of both interests. The amounts of cash and shares it keeps in TerraForm Power would be determined by the company along with holders of the yieldco’s public “class A shares,” according to the filing.

TerraForm Power owns almost 3,000 megawatts of wind and solar in OECD countries including the U.S. TerraForm Global, meanwhile, owns 919 megawatts of such assets in Brazil, India, China, South Africa, Thailand, Malaysia and Uruguay.

Friday Massacre

SunEdison’s ultimate plan came about after the company considered proposals from some holders of its second-lien notes who participated in its operating loan, and its unsecured creditors committee. It determined that only the first could succeed, and under the plan the second-lien noteholders will back a rights offering, which gives them an opportunity to buy TerraForm Power Class A shares, according to court papers. They will also select the new board of the reorganized company.

Key to the Brookfield agreements are a resolution of what SunEdison has said were potentially billions in claims it had against the two yieldcos over projects, services and payments they received from SunEdison during times before its bankruptcy when it was technically insolvent. The two have also had disputes over the so-called “Friday Night Massacre” and other actions leading up to the bankruptcy, with the yieldcos also having claims against SunEdison.

SunEdison has proposed a range of $9.4 million to $22.9 million be set aside from the pact for creditors — a midpoint of just $16 million. The issue is to be decided at trial, with an initial hearing set for April 4. So far a committee of unsecured creditors and a trustee for its $2 billion in convertible notes have already objected.

The “absence of any incremental value for unsecured creditors is alarming given the astounding fees and expenses” incurred in the bankruptcy, including $130 million spent on professionals, and over $1 billion in connection with an operating loan, the convertible note trustee, BOKF, said in its objection. It called the case so far a “managed liquidation” run for the benefit of secured lenders, and said it would support any motion from unsecured creditors to have the case convert to Chapter 7, which would mean an all-out liquidation.

That would allow unsecured creditors to pursue legal claims against the yieldcos as well as their directors and officers for securities fraud, breaches of fiduciary duty and other issues.

The case is In re SunEdison Inc., 16-10992, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

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