SunEdison shares rallied today, climbing by as much as 6.57% to $5.40 per share in early trading this morning (before quickly retreating) after the company announced that it had reached a deal to extinguish $336 million in debt that was issued in exchangeable notes due in 2020. The stock slumped on Tuesday following various analyst reports with differing views on the company and the new terms of its deal to purchase Vivint Solar.
Also today, an update on the deal with Dominion Resources, which operates power plants that run on solar energy, was released.
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SunEdison shares have been highly volatile, and some major heavyweights have entered the fray. Bronte Capital went long not that long ago, while Dan Loeb exited his position earlier this month. David Einhorn also owned shares, as did Leon Cooperman’s Omega Capital, before dumping them recently.
SunEdison strikes a deal for subsidiary
In a press release this morning, SunEdison announced that Seller Note, one of its subsidiaries, has signed an agreement to extinguish all of the $336 million outstanding notes with a 3.74% aggregate principal. The Guaranteed Exchangeable Senior Secure Notes that are extinguished under the deal were due in 2020.
In exchange for extinguishing those notes, the holders will receive interest in some of the projections that are currently under development and TerraForm Power shares. TerraForm is one of SunEdison’s YieldCos and also a subsidiary of the solar panel company. YieldCos have become a trend in the solar industries with many companies forming them to hold their power projects by raising money from investors to buy the projects from them and then selling power to utility companies on contract.
Management said the agreement was designed to deleverage the solar panel company’s balance sheet by selling some of its assets that are under development and some TerraForm shares.
Terms of the agreement
About $121 million of the notes will be extinguished not long after the agreement was signed, and SunEdison will transfer about 12.16 million shares to the buyers, according to a filing with the Securities and Exchange Commission. The rest of the notes will be extinguished after the projects that are part of the deal are transferred. Some of the projects must be transferred by Apr. 1, while the rest must be transferred by June 1. With each transfer, more notes will be extinguished. If any of the projects are not transferred by the required dates, SunEdison will repurchase notes in an equivalent amount within 20 days.
The filing states that the buyers of the SunEdison assets and TerraForm Power shares are D.E. Shaw Group, Madison Dearborn Capital Partners IV, Northwestern University, and some affiliates of SunEdison. The investors have agreed not to sell the TerraForm shares until either Apr. 1 or the date on which the agreement is terminated under certain circumstances, whichever happens first, says the filing.
First phase of Dominion deal closes
Also today, Dominion Resources announced that the first phase of the deal with SunEdison to sell a 33% stake in 425 megawatts of solar capacity has closed. In a press release, Dominion said SunEdison paid about $180 million, which includes ownership in 253 megawatts of solar capacity generated at 15 sites in five states.
The two companies expect the second phase to close sometime in early 2016. SunEdison will pay about $120 million for a 33% stake in 172 megawatts of capacity located at nine locations in three states. Dominion is using the payments to pay down some of its debt.
SunEdison seeks credit facility
Last week on Christmas Eve, a regulatory filing revealed that SunEdison is seeking a new credit facility – something that was predicted recently by Axiom Capital. The filing indicated that the solar panel company had been discussing financing options with investors and lenders since Dec. 10 about a new second lien credit facility of up to $650 million. The second lien credit facility would be used to repay the current credit facility.
Management intends to continue exploring possible second lien credit facility options.