Dive Brief:
- Clean energy developer SunEdison Inc. faces a potential $1.4 billion technical default on loans and credit facilities if the company fails to file its annual 10-K report for 2015 by March 30, Bloomberg reports.
- The renewables developer has postponed the release of its report twice already after announcing a "material weakness" in its internal accounting system.
- The solar company reported a total debt of $11.7 billion by the end of September 2015, more than double the amount it reported last year, as it acquired projects and companies on six continents, prompting questions from investors whether it borrowed too much, too fast.
Dive Insight:
SunEdison's financial woes aren't over as it faces a potential default if it fails to release its annual 2015 report, analysts told Bloomberg.
“They have a big issue coming with their debt,” Patrick Jobin, an analyst at Credit Suisse Group AG, said in an interview, citing two credit facilities that require the company to provide financial disclosures.
Because that hasn’t happened, it’s unclear if SunEdison is able to meet its obligations, he said. “We’re sitting here blindfolded. I don’t even know what cash-generating assets they have left.”
The company reported a $11.7 billion debt at the end of September 2015, but the company said in a January presentation that it expected to have $619 million in cash on hand by the end of 2015. SunEdison took out a $725 million second-lien credit facility in January with Barclays Plc, Deutsche Bank AG, KeyCorp and Macquarie Bank Ltd. as joint bookrunners, with terms requiring the company to release an audited financial statement for 2015 within 90 days of the end of its fiscal year, March 30.
“If they have not filed by March 30, they will be in default,” said Ian Feng, an analyst at Covenant Review LLC, a credit research firm. Bloomberg noted will become an “Event of Default” when the cure period expires. “That will be 15 days after they’ve breached.”
Earlier this year, Hawaiian Electric Companies (HECO) cancelled three power purchase agreements from SunEdison while major residential solar developer Vivint Solar pulled the plug on its proposed $1.82 billion merger deal.
Vivint Solar's decision to pull out of the merger sent SunEdison's stocks tumbling earlier this year, saying the company failed to meet its obligations laid out in the merger agreement, adding that they will "seek all legal remedies" to reduce financial penalities otherwise incurred because they ended the deal.
Before Vivint pulled out, SunEdison struggled to find banks willing to finance the acquisition, especially after two recent SunEdison acquisitions may have compromised its financial leverage, leaving investors with the impression it overreached, according to Greentech Media.
A SunEdison spokesperson declined to comment to Bloomberg.
