Riding the SunEdison Inc (OTCMKTS:SUNEQ) Express

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SunEdison Inc (OTCMKTS:SUNEQ) is making a huge move up on accelerating volume in recent weeks quickly becoming one of the top most traded stocks on the entire exchange. The stock is rising up after the final collapse that came after Judge Stuart Bernstein who has presided over SunEdison’s chapter 11 case from its start in April, said it is “substantially unlikely” the company would be able to pay off its debts. Even working with book values on paper and estimates of what asset sales would bring, SunEdison would come up from $1 billion to $2.5 billion short of debts, the judge said.

SUNEQ market capitalization collapsed over the past 2 years. It used to be the darling of solar energy and was held by many institutions and fund managers. SUNEQ comes to bankruptcy after disappointing earnings, the reclassification of more than $700 million worth of debt as well as a crushing debt load acquired as the company borrowed heavily to buy up wind and solar developers in the past.

SunEdison Inc (OTCMKTS:SUNEQ) develops, finances, installs, owns and operates renewable power plants, delivering predictably priced electricity to its residential, commercial, government and utility customers. The company is one of the leading renewable energy asset managers and provides customers with asset management, operations and maintenance, monitoring and reporting services. Corporate headquarters are in the United States with additional offices around the world.

SunEdison spent billions on acquiring third party assets in the last few years which they put into subsidiary yieldcos that were intended to help boost the multiples of SunEdison shares yet ended up being a weight around the neck of SunEdison.

The Company’s subsidiaries TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL) have seen massive drops over the past year yet they remain standing and are not planning to declare bankruptcy. Both firms have existing legal protections that should shield equity investors in the stocks from legal claims by SunEdison creditors.

On April 21 SUNEQ announced it has commenced a process to restructure its balance sheet and position the Company for the future. To facilitate this restructuring, SunEdison and certain of its domestic and international subsidiaries have filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the Southern District of New York.

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The Company said they secured commitments for new capital totaling up to $300 million in debtor-in-possession (DIP) financing from a consortium of first and second lien lenders. Subject to Court approval, these financial resources will be made available to the Company to support its continuing business operations, minimize disruption to its worldwide projects and partnerships, and make necessary operational changes.

Tuesday June 7 marks the start of the official hearing to decide whether an equity committee shall be granted. This gives common shareholders a seat at the table and lets them negotiate directly with creditors and debt holders. The Investor Recovery Charitable Trust which Trust represents 268 individual shareholders that together own over 13 million shares will lead the charge.

On October 3 SUNEQ responded to Claims and Allegations Made By TerraForm Power, Inc., and TerraForm Global, Inc. who issued a press release purportedly describing allegations made by the Yieldcos in proofs of claims filed by them last Friday in SunEdison, Inc.’s (otc pink:SUNEQ) and its related affiliates’ bankruptcy cases (collectively, “SunEdison”).  While SunEdison disagrees with many of the statements, claims and allegations made by the Yieldcos in their press releases, SunEdison confirms that settlement discussions with the Yieldcos have commenced, and adds that such settlement discussions relate both to alleged claims asserted by the Yieldcos against SunEdison, as well as meaningful claims that the SunEdison estate is reviewing and may assert against the Yieldcos.

Like any similar situation with any other creditor in their Chapter 11 cases, SunEdison will actively pursue the dismissal or settlement of proofs of claims in the bankruptcy cases – although no date has been established yet in the bankruptcy cases for objecting to proofs of claims. In addition, as the Yieldcos disclosed in their press releases, SunEdison and the Yieldcos are engaged in a collaborative sale process to sell either SunEdison’s ownership interests and other rights in the Yieldcos or the entirety of the equity in the Yieldcos.

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Currently trading at a $28 million market valuation SUNEQ hit the OTC after being de-listed by the NYSE after filing for bankruptcy protection with $16.1 billion of debt on the books. Investors had hoped the Company could come out with the commons intact however those hopes have been dashed by Judge Stuart Bernstein said it is “substantially unlikely” the company would be able to pay off its debts. Even working with book values on paper and estimates of what asset sales would bring, SunEdison would come up from $1 billion to $2.5 billion short of debts. He also turned down a request for an official committee to represent shareholders driven in part by shock over the rapid decline in value in the company. We will be updating on SUNEQ when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with SUNEQ.

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Disclosure: we hold no position in SUNEQ either long or short and we have not been compensated for this article.

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