SunEdison’s new term loans, exchanges fall short of addressing company’s debt problem: analyst

By Rebecca Melvin

New York, Jan. 8 – SunEdison Inc.’s new term loans and agreements to exchange existing convertibles for a new convertible and stock are not enough to address the company’s mountain of debt and will almost certainly be followed up with additional exchanges or other measures, analyst Gordon Johnson of Axiom Capital Management told Prospect News on Friday.

Johnson said the company likely did all that it could do for the time being, but that additional measures will need to be taken.

“This is truly a kind of unanalyzable company. You don’t know what the cash flows on the projects are; you don’t know what the debt obligations are, or what the debt holders are requiring,” Johnson said.

SunEdison priced $725 million of second-lien secured term loans and entered into exchange transactions resulting in $738 million in debt reduction, the company announced Thursday.

The total net recourse debt was reduced by $300 million, and the convertible preferred equity was reduced by $158 million. Fully diluted shares outstanding were increased by 69 million shares, implying a 17% dilution, according to SunEdison’s transaction summary.

SunEdison spokesman Ben Harborne declined to comment further on the exchanges.

“They created a financially engineered yieldco, and made a huge bet that investor appetite for yieldcos was going to be around for the foreseeable future. They have taken out massive amounts of debt to finance projects, building out and buying projects, and dropping them down to the yieldco, but then the appetite went away,” Johnson said, suggesting that the catalyst for the lack of appetite was the fall in oil prices.

The company’s debt has gone from $2 billion to $11 billion, Johnson said, and he has reduced his price target for SunEdison shares to $2.00.

SunEdison shares closed at $3.41 on Friday.

SunEdison’s existing 2.75% convertibles due 2021, a portion of which was included in the exchanges, dropped to 39.5 on Friday from 54 previously. Prices on SunEdison’s six other convertible issues were not heard. Neither was a price on the new SunEdison 5% exchange convertible heard.

SunEdison’s second-lien term loan began trading on Thursday, with the $225 million second-lien term loan A2 due July 2, 2018 quoted at 71 bid, 78 offered, according to one trader.

The trader explained that the term loan A2 was quoted so far below its issue price because of the levels at which the company is doing its convertibles exchange.

A distressed debt trader said, “I heard guys complaining about [the exchange offer]. They’re all saying ‘why would they do this?’ It’s their desperation, needing money.”

Exchange terms

As previously reported, SunEdison entered into a series of exchange agreements with some noteholders on Wednesday, according to a company news release and a 6-K filing with the Securities and Exchange Commission.

Specifically, the company agreed to exchange some of its 2% convertible senior notes due 2018, 0.25% convertible senior notes due 2020, 2.75% convertible senior notes due 2021, 2.25% convertible senior notes due 2022, 2.625% convertible senior notes due 2023, 3.375% convertible senior notes due 2025 and 6.75% series A perpetual convertible preferred stock.

Under the exchange agreements, SunEdison issued

• $225 million principal amount of new senior secured convertible notes due 2018 in exchange for an aggregate of $40.5 million principal amount of the 2020 notes, $106.9 million principal amount of the 2022 notes, $97 million principal amount of the 2023 notes and $91.4 million principal amount of the 2025 notes;

• About 28 million shares of common stock in exchange for an aggregate of $44.3 million principal amount of the 2018 notes, $71 million principal amount of the 2020 notes, $10.5 million principal amount of the 2021 notes, $37 million principal amount of the 2022 notes, $43 million principal amount of the 2023 notes and $38.5 million principal amount of the 2025 notes; and

• 11.8 million shares of common stock in exchange for an aggregate of $158.3 million, or 158,327 shares, of the preferreds.

The exchange transactions are expected to close Jan. 11.

Maryland Heights, Mo.-based SunEdison makes solar technology and develops, finances, installs and operates distributed solar power plants.

Stephanie Rotondo and Sara Rosenberg contributed to this article

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.