TerraForm inks SunEdison claim deal, gets proposals from Brookfield

By Caroline Salls

Pittsburgh, Jan. 23 – SunEdison, Inc. entered into a memorandum of understanding that outlines potential settlements of intercompany claims, according to an 8-K filed Monday by TerraForm Global, Inc.

The parties to the memorandum of understanding include TerraForm Global, Inc. and TerraForm Global, LLC, SunEdison, TerraForm Power, Inc. and TerraForm Power, LLC.

The claims to be settled involve SunEdison and its affiliated debtors and non-debtors and their employees, officers, directors, agents and representatives, TerraForm, TerraForm Global’s employees, officers, directors, agents and representatives, as well as TerraForm Power, LLC and its employees, officers, directors, agents and representatives.

The memorandum of understanding has been approved by the boards of directors of TerraForm Global, SunEdison and TerraForm Power.

The settlements of the intercompany claims are subject to the approval of the U.S. Bankruptcy Court for the Southern District of New York in the SunEdison Chapter 11 case.

Under the memorandum of understanding, the parties will work toward agreeing to the terms of two separate settlement agreements as soon as possible on or before Jan. 27.

M&A transactions

In addition, TerraForm Global and SunEdison will work to document a transaction for the sale of TerraForm Global in parallel with a separate effort by TerraForm Power and SunEdison to document a transaction for the sale of TerraForm Power, each in the form of merger and acquisition transactions.

TerraForm said the memorandum of understanding also contains non-binding proposed settlement terms to resolve the complex legal relationship arising out of SunEdison’s sponsorship of a yield company, including allocation of the total consideration paid in connection with an M&A transaction and the mutual release of all TerraForm Global intercompany claims.

At the closing of the TerraForm Global transaction, in exchange for its class B common stock, class B units of TerraForm Global LLC, incentive distribution rights and all other interests in TerraForm Global, Inc., SunEdison would receive 25% of the total consideration paid to all stockholders of TerraForm Global.

The remaining consideration would be distributed to holders of shares of the class A common stock of TerraForm Global, including SunEdison.

At the closing of the TerraForm Power transaction, in exchange for its class B common stock of TerraForm Power, class B units of TerraForm Power LLC, incentive distribution rights and all other interests in TerraForm Power SunEdison would receive 36.9% of the total consideration paid to all TerraForm Power stockholders.

The remaining consideration would be distributed to holders of shares of the class A common stock of TerraForm Power.

The proposed settlement must be approved by the court by April 1, subject to an extension to April 15.

Brookfield exclusivity agreement

According to the 8-K, TerraForm Global has also been exploring and evaluating potential strategic alternatives to maximize stockholder value, including a merger or sale of its entire business or other business combinations or sponsorship arrangements.

As a result, TerraForm Global and TerraForm Global LLC entered into an exclusivity agreement with Brookfield Asset Management Inc. under which TerraForm has agreed to negotiate exclusively with Brookfield in connection with a possible negotiated business combination transaction until the earlier of the execution of a definitive agreement and 11:59 p.m. ET on March 6.

Brookfield bids

In a bid letter, Brookfield proposed four possible transactions, including the purchase of 100% of TerraForm for cash, the purchase of 100% of the company for cash and either 100% of TerraForm Power or at least a 50.1% interest in TerraForm Power in a sponsorship transaction, Brookfield’s replacement of SunEdison as sponsor and controlling stockholder of TerraForm Global or replacement of SunEdison as sponsor and controlling stockholder of TerraForm Global and TerraForm Power.

In the whole company transaction, Brookfield would acquire all outstanding shares of TerraForm Global for $4.15 per share in cash, and all shares of the company’s class B common stock and class B units of TerraForm Global LLC held by SunEdison would be exchanged for shares of TerraForm class A common stock.

For the whole TerraForm Global with TerraForm Power transaction, Brookfield indicated it would be willing to offer additional incremental consideration of $0.20 per share in cash, payable on the closing of a transaction for either 100% of TerraForm Power or at least 50.1% of TerraForm Power in a sponsorship transaction, resulting in a total consideration to be paid to stockholders of $4.35 per share in cash.

In the sponsorship transaction, Brookfield would replace SunEdison as the company’s sponsor and controlling stockholder, and would invest cash in TerraForm Global in exchange for a number of newly issued class A shares that would equal 50.1% of the total number of shares outstanding in TerraForm Global.

TerraForm said Brookfield indicated that, if it is advantageous to TerraForm, Brookfield would be prepared to consider acquiring more class A shares in a sponsorship transaction.

All class B shares and class B units of TerraForm Global LLC held by SunEdison would be exchanged for class A shares.

TerraForm is a Bethesda, Md., owner and operator of clean energy power plants.

Based in Maryland Heights, Mo., SunEdison operates renewable power plants. It filed for bankruptcy on April 21, 2016 under Chapter 11 case number 16-10992.

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