This morning, SunEdison announced that it has filed for Chapter 11 bankruptcy protection. SunEdison yieldcos TerraForm Power and TerraForm Global are not part of this filing. The company also announced that it has secured commitments for up to $300 million in debtor-in-possession financing from its first- and second-tier loan holders.
Analysts and observers have been anticipating this filing for more than a month, after the acquisition of Vivint Solar fell through. The company is also under investigation by the U.S. Securities and Exchange Commission and the Department of Justice.
Our decision to initiate a court-supervised restructuring was a difficult but important step to address our immediate liquidity issues, said SunEdison CEO Ahmad Chatila. The court process will allow us to right-size our balance sheet and reduce our debt, providing the opportunity to support the business going forward while focusing on our core strengths.
The chapter 11 process allows for reorganization of a company, as opposed to some other bankruptcy filings which result in liquidation. SunEdison says that it has made filings to allow a smooth transition to chapter 11 without disrupting the companys main business, including requests for the use of the $300 million in debtor-in-possession funding.
If these are approved by the court it will be able to pay wages and continue its day-to-day business, including proceeding with work on its U.S. and international projects. CEO Ahmad Chatila has also made reference to shedding non-core assets as well as taking other steps to help us get the most value out of our technological and intellectual property.
Bloomberg New Energy Finance Head of Solar Analysis Jenny Chase notes that what has happened to SunEdison should not be taken as indication of larger solar market dynamics. "SunEdisons bankruptcy says more about the companys strategic decisions than about the solar industry as a whole," declared Chase in a statement on the BNEF site.
"What has distinguished SunEdison has been the relentless and unfocused pursuit of growth, in which it has invested vast amounts of borrowed money. Not all of its ventures succeeded, which is inevitable in the project development business, but SunEdisons win to loss ratio was evidently insufficient."
Chase also notes that SunEdison’s bankruptcy will involve project sales. "There is plenty of value in the project pipeline, which ultimately comprises cash-generating assets not linked to the continued existence of SunEdison. However, investors will take time to do the due diligence to value these projects correctly before handing over cash for them."
Update: This article was modified on April 21 at 10:15 AM to include commentary by BNEF’s Jenny Chase.