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SunEdison’s Bankruptcy Heirs Seek New Strategy for Its Assets

September 19, 2016

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Contractors install 1248 photo voltaic modules on top of a Kohl's Department Store roof June 2, 2010 in Hamilton Township, New Jersey. The project is part of a SunEdison Corporation contract with Kohl's.Photograph by Robert Nickelsberg—Getty Images

TerraForm Global and TerraForm Power, the “yieldcos” of bankrupt solar company SunEdison, said on Monday they were exploring strategic alternatives, including a sale of their entire business.

TerraForm Power’s shares were up 3.4% at $13.49 in early trading, while TerraForm Global was up 7.4% at $3.65.

The two companies said on Monday they are also considering replacing SunEdison with a new sponsor, by negotiating new sponsorship arrangements or by assuming SunEdison’s existing sponsorship agreements.

Yieldcos are publicly traded subsidiaries that hold renewable energy assets, including assets bought from their parents or sponsors.

Some of the strategic alternatives for TerraForm Global and TerraForm Power may require stockholder approval, while some may require approval of the U.S. Bankruptcy Court for the Southern District of New York, the companies said.

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The yieldcos were not part of SunEdison’s bankruptcy in April and the companies said at the time that they had sufficient liquidity to operate and that their assets were not available to satisfy the claims of SunEdison creditors.

However, since the bankruptcy the two companies have faced a number of problems.

The companies said in April that SunEdison’s bankruptcy “will present challenges” for financing agreements for certain projects.

SunEdison said in July it is looking to sell its interests in TerraForm Global, which holds renewable energy assets primarily outside the United States.

TerraForm Power adopted a shareholders rights plan in the same month to prevent the sale of any significant number of Class A shares after Brookfield Asset Management Inc and hedge fund Appaloosa announced plans to jointly bid for SunEdison’s stake in it.

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SunEdison also said last month it plans to stop making interest payments on behalf of the yieldcos due to its Chapter 11 proceedings. The two yieldcos had called SunEdison’s decision “invalid” and said they would contest the decision.

Both the companies are also yet to file their 2015 annual earnings report and first-quarter 2016 report after they had identified “material weaknesses” in their internal controls over financial reporting due to SunEdison.

TerraForm Global and TerraForm Power on Friday provided preliminary results for the second quarter ended June 30.

TerraForm Global has engaged Centerview Partners, Greentech Capital Advisors and AlixPartners as financial advisers.

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

Both the companies have engaged Sullivan & Cromwell LLP as their legal counsel.