SunEdison Inc., the worst-performing clean-energy developer, plunged to a record low after a holding company it controls said SunEdison may seek bankruptcy protection.
“Due to SunEdison’s liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection,” TerraForm Global Inc., said in a filing Tuesday.
SunEdison fell 41 percent to 74 cents at 10:46 a.m. in New York, the lowest on record. TerraForm, a yieldco formed and controlled by SunEdison, fell 20 percent. The yield on SunEdison’s convertible bonds due October 2018 surged to a record 169.5 percent on March 24, from 26 percent at the end of last year, according to data compiled by Bloomberg. The yield dropped to 133 percent on Monday, when the bonds last traded.
SunEdison spent billions buying up wind and solar projects and developers around the world, driving up its debt to $11.7 billion at the end of the third quarter. That prompted investors to question its liquidity, and the Maryland Heights, Missouri-based company has slumped more than 95 percent in the past year, the most on the WilderHill New Energy Global Innovation Index of 104 clean energy companies.
The company has already postponed the release of its 2015 annual report, twice. If SunEdison fails to file the report by Wednesday, it must reach accommodations with lenders on at least $1.4 billion in loans and credit facilities or face a potential technical default.
Angelo Zino, an analyst at S&P Global Intelligence, said bankruptcy protection or a liquidity crisis is an “almost foregone conclusion” for SunEdison. “They’ve run out of options.”
Ben Harborne, a SunEdison spokesman, wasn’t immediately available for comment. The Wall Street Journal reported Monday that the Securities and Exchange Commission is investigating whether the company overstated its liquidity position in late 2015. The company said Feb. 29 that it’s conducting an internal inquiry into its financial status.
TerraForm Global said SunEdison may soon face a major credit event, according to the filing. TerraForm also delayed filing its 2015 annual report. The Bethesda, Maryland-based company said it will be submitted after Wednesday, without giving a specific time.
TerraForm, a public holding company that has focused on buying SunEdison’s and other developers’ wind and solar assets in emerging markets, relies “significantly” on its parent company’s systems and personnel to complete its own financial reports.
The company said in the filing it would be able to weather any adverse effects if its parent company files for bankruptcy.
“TerraForm Global does not rely substantially on SunEdison for funding or liquidity and believes that, in the event SunEdison seeks bankruptcy protection, TerraForm Global will have sufficient liquidity to support its ongoing operations.”
© 2016 Bloomberg
Lead image: Bankruptcy petition. Credit: Shutterstock.