SUNE - Sunedison Inc.

[Pelagic]

I am not sure who you think this is good for, but they are all basically screwed.  VSLR has no business model, and SUNE is staring down BX with a lawsuit that would push them into bankruptcy.  It's a game of chicken. The market's reaction, SUNE up big pre-market, is a great example of retail day traders not understanding the implications.

 

I'm curious how you think a lawsuit brought by BX could drag SUNE into bankruptcy? Not having to acquire VSLR frees up cash that was intended for the acquisition and any settlement is likely going to be for quite a bit less than the acquisition price. Furthermore SUNE has the option to drag things out in court buying them time to strengthen their balance sheet and cash position with asset sales if need be. This is a better alternative than the acquisition going through and having SUNE take on VSLR's operations. On VSLR, I agree, I don't see them having many options now.

[ugadawg_98]

This is a long thread, started over a year ago and it looks to me as if many of the original assumptions Einhorn and others made were simply wrong. For those long the common, can someone please give me the current bull thesis?

 

I ask that in view of the market prices of the rest of the cap structure:

 

SUNE's 2% convertible bonds of 4/2018 (senior unsecured) now trade at .20 on the dollar.

 

SDSNP, which is SUNE's $1000 par convertible perpetual preferred now trades at $115 or .115 to the dollar. Also, they just announced they were deferring pfd dividends.

 

Given where the rest of the cap structure trades, can anyone paint a realistic way to get a value anywhere close to where the common now trades?

[ugadawg_98]

....or to put it another way, if you believe SUNE survives, why bother with the common when the bonds or preferred offer outstanding returns and don't have the dilution overhang (they've been issuing a lot of stock)?

[sampr01]

Do you mind sharing CUSIP number for unsecured. Thanks

 

This is a long thread, started over a year ago and it looks to me as if many of the original assumptions Einhorn and others made were simply wrong. For those long the common, can someone please give me the current bull thesis?

 

I ask that in view of the market prices of the rest of the cap structure:

 

SUNE's 2% convertible bonds of 4/2018 (senior unsecured) now trade at .20 on the dollar.

 

SDSNP, which is SUNE's $1000 par convertible perpetual preferred now trades at $115 or .115 to the dollar. Also, they just announced they were deferring pfd dividends.

 

Given where the rest of the cap structure trades, can anyone paint a realistic way to get a value anywhere close to where the common now trades?

[ugadawg_98]

You can do a search here by name/symbol and get quotes and cusips.

http://finra-markets.morningstar.com/MarketData/Default.jsp

 

Anyone have any thoughts on the value of SUNE common versus where the rest of the capital structure trades?

 

 

 

Do you mind sharing CUSIP number for unsecured. Thanks

 

This is a long thread, started over a year ago and it looks to me as if many of the original assumptions Einhorn and others made were simply wrong. For those long the common, can someone please give me the current bull thesis?

 

I ask that in view of the market prices of the rest of the cap structure:

 

SUNE's 2% convertible bonds of 4/2018 (senior unsecured) now trade at .20 on the dollar.

 

SDSNP, which is SUNE's $1000 par convertible perpetual preferred now trades at $115 or .115 to the dollar. Also, they just announced they were deferring pfd dividends.

 

Given where the rest of the cap structure trades, can anyone paint a realistic way to get a value anywhere close to where the common now trades?

[muscleman]

This is a long thread, started over a year ago and it looks to me as if many of the original assumptions Einhorn and others made were simply wrong. For those long the common, can someone please give me the current bull thesis?

 

I ask that in view of the market prices of the rest of the cap structure:

 

SUNE's 2% convertible bonds of 4/2018 (senior unsecured) now trade at .20 on the dollar.

 

SDSNP, which is SUNE's $1000 par convertible perpetual preferred now trades at $115 or .115 to the dollar. Also, they just announced they were deferring pfd dividends.

 

Given where the rest of the cap structure trades, can anyone paint a realistic way to get a value anywhere close to where the common now trades?

 

I think you are right that Eihorn made wrong assumptions on the sum of parts. I haven't figured all out, but the value of the TERP stocks per share is obviously wrong when I see this:

 

Margin Loan

On January 29, 2015, a wholly-owned subsidiary of SunEdison entered into a margin loan agreement with the lenders party thereto (each, a “Lender”) and Deutsche Bank AG, as the administrative agent and the calculation agent thereunder, and SunEdison concurrently entered into a guaranty agreement in favor of the administrative agent for the benefit of each of the Lenders, pursuant to which SunEdison guaranteed all of the subsidiary’s obligations under the margin loan agreement. The margin loan agreement was subsequently amended in September 2015 (as amended, the "Margin Loan Agreement"). Under the Margin Loan Agreement, the subsidiary borrowed $410 million in term loans. The net proceeds of the term loans, less certain expenses, were made available to SunEdison to fund the acquisition of First Wind. The term loans mature on January 29, 2017. All outstanding amounts under the Margin Loan Agreement bear interest at a rate per annum equal to a three-month Eurodollar rate plus an applicable margin, and interest is payable quarterly. As of September 30, 2015, the applicable interest rate was 6.25%. We paid fees of $11 million upon entry into the Margin Loan Agreement, and fees of $4 million upon entry into the margin loan amendment, which were both recognized as deferred financing costs.

The Margin Loan Agreement requires the subsidiary to maintain a loan to value ratio not to exceed 40% (based on the value of the TERP Class A Common Stock, which certain of the collateral may be exchanged for). In the event that this ratio is not maintained, the subsidiary must post additional cash collateral under the Margin Loan Agreement and/or elect to repay a portion of the term loans thereunder. During the third quarter of 2015, we were required under the agreement to deposit $152 million into an escrow account as additional collateral. This amount is reported in non-current restricted cash on the condensed consolidated balance sheet as of September 30, 2015. In October 2015, we were required to deposit an additional $91 million in cash collateral. In addition, the Margin Loan Agreement requires the repayment of all or a portion of the term loans made thereunder upon the occurrence of certain events customary for financings of this nature, including other events relating to the price, liquidity or value of TERP Class A Common Stock, certain events or extraordinary transactions related to TERP and certain events related to SunEdison.

The subsidiary’s obligations under the Margin Loan Agreement are secured by a first priority lien on shares of Class B common stock in TERP, and Class B units and incentive distribution rights in Terra LLC, in each case, that are owned by the subsidiary. The Margin Loan Agreement contains customary representations and warranties, covenants and events of default for financings of this nature. Upon the occurrence and during the continuance of an event of default, any Lender may declare the term loans due and payable, exercise remedies with respect to the collateral and demand payment from SunEdison of the obligations under the Margin Loan Agreement then due and payable. TERP has agreed to certain obligations in connection with the Margin Loan Agreement relating to its equity securities.

 

 

 

We all know that when you create a long position using margin, and then you keep getting margin calls, the value of this long position is essentially close to zero.  :)

 

I also find this alarming:

http://www.streetinsider.com/Corporate+News/SunEdison+(SUNE)+Issues+$225M+of+Conv.+Notes+Under+Indenture%3B+Second+Lien+Credit+Agreement+Entered/11218050.html

 

Loans under the Second Lien Credit Facility will bear interest at a rate of LIBOR + 10.0% per annum or a specified base rate + 9.0% per annum and will mature on July 2, 2018.

 

This is a 725 million loan that has an interest rate of LIBOR +10%. I have never seen loans with such a rate. Why is SUNE so desperate as to enter into such agreements? Are they running out of cash in a few days without it?  ::)

[glorysk87]

This is a long thread, started over a year ago and it looks to me as if many of the original assumptions Einhorn and others made were simply wrong. For those long the common, can someone please give me the current bull thesis?

 

I ask that in view of the market prices of the rest of the cap structure:

 

SUNE's 2% convertible bonds of 4/2018 (senior unsecured) now trade at .20 on the dollar.

 

SDSNP, which is SUNE's $1000 par convertible perpetual preferred now trades at $115 or .115 to the dollar. Also, they just announced they were deferring pfd dividends.

 

Given where the rest of the cap structure trades, can anyone paint a realistic way to get a value anywhere close to where the common now trades?

 

I think it's pretty evident that Einhorn was wrong.  If you read through his initial presentations he ascribed significant value to two things:

 

A) Value of the YieldCo shares that SUNE held

 

B) Value of the IDRs that would be paid from the YieldCos to SUNE

 

Not much analysis required to determine that his estimates of value for both of those are/were wrong.  Low equity prices is a self-fulfilling prophecy here - price decline increases cost of capital at the YieldCos to an untenable level > can't use equity to fund acquisitions > dividend growth dries up > IDRs remain at zero.

 

With the debt load that SUNE carries as well as the terms on some of their alternative financing (seriously, look up the terms on their warehouse facilities, they're unbelievable) there's very little to indicate that the company will survive considering their ability to monetize assets by dropping them to the YieldCos is now gone.

[muscleman]

This is a long thread, started over a year ago and it looks to me as if many of the original assumptions Einhorn and others made were simply wrong. For those long the common, can someone please give me the current bull thesis?

 

I ask that in view of the market prices of the rest of the cap structure:

 

SUNE's 2% convertible bonds of 4/2018 (senior unsecured) now trade at .20 on the dollar.

 

SDSNP, which is SUNE's $1000 par convertible perpetual preferred now trades at $115 or .115 to the dollar. Also, they just announced they were deferring pfd dividends.

 

Given where the rest of the cap structure trades, can anyone paint a realistic way to get a value anywhere close to where the common now trades?

 

I think it's pretty evident that Einhorn was wrong.  If you read through his initial presentations he ascribed significant value to two things:

 

A) Value of the YieldCo shares that SUNE held

 

B) Value of the IDRs that would be paid from the YieldCos to SUNE

 

Not much analysis required to determine that his estimates of value for both of those are/were wrong.  Low equity prices is a self-fulfilling prophecy here - price decline increases cost of capital at the YieldCos to an untenable level > can't use equity to fund acquisitions > dividend growth dries up > IDRs remain at zero.

 

With the debt load that SUNE carries as well as the terms on some of their alternative financing (seriously, look up the terms on their warehouse facilities, they're unbelievable) there's very little to indicate that the company will survive considering their ability to monetize assets by dropping them to the YieldCos is now gone.

 

What you have pointed out is George Soros' reflexivity. The value itself is impacted by the way market views it. Eihorn's thesis here is quite similar to Bill Ackman's "Platform value" notion. It is amazing that both made  this same rationalization to justify an overvalued investment, a sign that other real bargains are hard to find.

 

I see in an earlier post in this thread that believes even if no more projects are done, SUNE will still be worth a lot. Any thoughts on that? It seems like the recourse debt level itself is already wrong in that post.

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/sune-sunedison-inc/msg231059/#msg231059

[glorysk87]

Einhorn mentioned the economic EPS was something like $1.30 and the stock is trading at $2.  If Einhorn is right, or even somewhat close, there is a big disconnect here. 

 

Also it looks like SUNE's ownership interest in the yieldcos, which look like viable businesses, at current mkt cap is more than the mkt cap of SUNE itself. 

 

On the flip side, you have an internal investigation, I have no idea what their true liquidity position is, plus you got lawsuits and who knows what else.

 

There is so much confusion and uncertainty here that anybody who can go through this mess and figure out roughly what this business is worth as is could potentially make a shit load of money. 

 

FD bought some 2018 options at $2 for under a buck....also bought 2018 terp options at $10 for a potentially fat dividend yield.  Why the hell not, market crashes in energy only come around every decade or so.  8)

 

If I recall correctly, Einhorn was estimating $1.00 of EPS for the DevCo portion of the company, but that estimate was predicated on some pretty loose assumptions.  Over 2,000 MW of project volume in 2016 at a gross profit of like 50 cents a MW.  I haven't exactly kept up with the news but I highly doubt they're going to do even close to that much business this year, or ever again considering their debt load + the fact that the YieldCos are basically removed as a source of financing.  The rest of his valuation was from the equity stakes in TERP/GLBL as well as the IDR's, which again, are not happening.

[glorysk87]

 

What you have pointed out is George Soros' reflexivity. The value itself is impacted by the way market views it. Eihorn's thesis here is quite similar to Bill Ackman's "Platform value" notion. It is amazing that both made  this same rationalization to justify an overvalued investment, a sign that other real bargains are hard to find.

 

I see in an earlier post in this thread that believes even if no more projects are done, SUNE will still be worth a lot. Any thoughts on that? It seems like the recourse debt level itself is already wrong in that post.

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/sune-sunedison-inc/msg231059/#msg231059

 

Honestly, I can't comment and frankly I don't think anyone can make an informed decision about the company. I spent weeks going through their filings (and those of TERP and GLBL) and came to the conclusion that they simply don't disclose enough information to come to a rational informed decision.  They don't include information on the pricing of their PPA's anywhere, and that's a pretty integral piece in figuring out their run-off value.  All that's left is taking management at their word which I'm not willing to do.

[formthirteen]

http://www.reuters.com/article/us-sunedison-inc-terraform-global-risk-idUSKCN0WV160

 

Shares of SunEdison Inc (NYSE:SUNE) plunged as much as 22% today after rumors surfaced that it's in negotiations with creditors.

…

U.S. solar energy company SunEdison Inc (SUNE.N), whose aggressive acquisition strategy has saddled it with almost $12 billion of debt, is at "substantial risk" of bankruptcy, one of its two publicly listed units warned on Tuesday.

…

A bankruptcy would rank among the largest involving a non-financial company in the past 10 years, according to bankruptcydata.com. SunEdison declined to comment.

…

SunEdison's shares - already reeling from a Wall Street Journal report on Monday that the company was being investigated for overstating its cash position - fell as much as 60 percent to a record low of 50 cents.

 

In Q2, 2015 9.3% of Greenlight Capital's public holdings were in SUNE:

http://formthirteen.com/greenlight-capital-10/holding/sunedison-inc-86732Y109

 

Altai Capital Management seems to have lost 50% of their public portfolio's value due to the decline in SUNE's stock:

http://formthirteen.com/altai-capital-management-49/holding/sunedison-inc-86732Y109

[AzCactus]

http://www.reuters.com/article/us-sunedison-inc-terraform-global-risk-idUSKCN0WV160

 

Shares of SunEdison Inc (NYSE:SUNE) plunged as much as 22% today after rumors surfaced that it's in negotiations with creditors.

…

U.S. solar energy company SunEdison Inc (SUNE.N), whose aggressive acquisition strategy has saddled it with almost $12 billion of debt, is at "substantial risk" of bankruptcy, one of its two publicly listed units warned on Tuesday.

…

A bankruptcy would rank among the largest involving a non-financial company in the past 10 years, according to bankruptcydata.com. SunEdison declined to comment.

…

SunEdison's shares - already reeling from a Wall Street Journal report on Monday that the company was being investigated for overstating its cash position - fell as much as 60 percent to a record low of 50 cents.

 

Altai Capital Management seems to have lost 50% of their public portfolio's value due to the decline in SUNE's stock:

http://formthirteen.com/altai-capital-management-49/holding/sunedison-inc-86732Y109

 

That is one concentrated fund. 

[PatientCheetah]

filed today, we can't complain that the market is inefficient in this case

[Palantir]

Finally, this circus ends in a clown show.

 

 

 

Lesson learned: value investors are taught to ignore price movements, but sometimes the market is trying to tell you something.

[dbuch]

BAM has acquired 11M shares of TERP and 11.6M economic exposure via swaps for 24.82% ownership of class A.

 

https://www.sec.gov/Archives/edgar/data/1001085/000095015716002016/sc13d.htm