Appaloosa accepts expedited trial against SunEdison


This afternoon the law firm representing hedge fund manager David Tepper’s Appaloosa Management released a statement indicating that their client had accepted the offer of a judge in the U.S. state of Delaware for an expedited trial against SunEdison.

The firm of Lowenstein Sandler also clarified that the pending closure of SunEdison’s acquisition of Vivint Solar, the latest version of which was approved by Vivint shareholders four days ago, will not stop Tepper’s suit.

Appaloosa is seeking to both stop a take/pay agreement under which SunEdison will transfer residential solar assets from Vivint to TerraForm Power, as well as monetary damages related to alleged damage to TerraForm. Appaloosa owns a 9.5% stake in TerraForm Power.

“The closing of the pending merger with Vivint will not prevent Appaloosa from obtaining relief to protect (TerraForm) and its stockholders from the injurious effects of the take/pay arrangement between (TerraForm) and SunEdison that Appaloosa has challenged,” states Lowenstein Sandler.

Last Wednesday Judge Boucher rejected Appaloosa’s request for an injunction to immediately stop the company from transferring assets to TerraForm, which has cleared the way for SunEdison’s acquisition of Vivint to move forward.

?However, there could be other problems. Lowenstein Sandler says that SunEdison is counting on a loan from Goldman Sachs which uses collateral in the form of Vivint assets in order to fund the $1.9 billion acquisition. The firm cites statements by Judge Bouchard which warn that he could stop the transfer of assets, which would undermine the basis for this loan.

The firm also cited several statements by Judge Bouchard which it says supports the possibility of a favorable ruling, including a description of SunEdison’s process to approve the acquisition as “inherently suspect”.

SunEdison declined to respond to the statements cited by Lowenstein Sandler. In this and other public statements, it is clear that Tepper is seeking a trial not only in court, but a battle in the media.

SunEdison remains besieged legally, as it is additionally fighting a suit by shareholders of Latin American Power after a deal for SunEdison to buy the company fell last fall. Latin American Power had also requested a hold on asset transfers, arguing that the danger of SunEdison going bankrupt means that it might not be able to extract compensation in the event of a favorable ruling.

While the only asset transfers that the judge forbade were those under exceptional circumstances, Lawrence Rolnick of Lowenstein Sanders notes that his firm has also argued that “SunEdison’s financial condition could mean that it would be unable to pay substantial monetary damages”.

SunEdison’s stock price remains in the basement, despite a minor up-tick following last week’s favorable legal ruling and news of its participation in a new factory in China.

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