SunEdison (SUNE)

[disdaniel 53]

I don't see how going under is possible if SUNE walks from the deal. 

I don't see how SUNE could agree to a deal that would cause it to go under--I don't see how anyone (judge, jury, or blackstone) could expect they would.  SUNE doesn't have the financing to swallow VSLR (indeed it has been actively locking itself out of financing options).  A deal just seems impossible, An all share deal would require an insane dilution (although that is perhaps the only fear keeping me from going in huge on sune--that SUNE just really wants a better deal and Blackstone gives it to them in the end).

No, if you look at SUNE actions since deal, everything has made the deal harder to happen.  Yes management has been saying we want deal, we want deal...but the actions have been opposite.  In retrospect a lot of sune actions that seem crazy at the time are not so crazy if you understand this.  Still I can't for the life of me understand why they made the deal in the first place...its all so unnecessary. 

And if I can see this (and began wondering weeks ago) you know Blackstone figured it out a long time ago...so what have they been up to?  Are they in on it?  Did everyone expect GS to pull funding at the last minute (having positioned itself to benefit from some last minute sabotage?) I guess I will find out in two weeks!

[pg6solar 85]

SUNE is 20% up PM - they and TERP settle with LAP. Lawsuit will be dropped when agreed upon payment of $28.5M is made by SUNE to LAP (TERP is not paying anything).

[lepv123 0]

53 minutes ago, pg6solar said:

SUNE is 20% up PM - they and TERP settle with LAP. Lawsuit will be dropped when agreed upon payment of $28.5M is made by SUNE to LAP (TERP is not paying anything).

Thats awesome! 

[explo 610]

Great. More news for the market to put a price on with its usual confusion induced volatility as a result. I hope for some more yieldco fills before the weekend.

 

[disdaniel 53]

This whole thing is such an obvious set-up...I'm starting to wonder if SEC is using it to investigate insider trading...that (consistent leaks to someone big who trades ahead of the market) is about the only thing that is consistent in the whole cock-up.  Maybe SEC caught blackstone or someone at sune (or both--hardly far fetched given what we have seen) in some minor shenanigans and this stage set drama to document the pattern is their way out.

[odyd 1,268]

That's good. Almost as my article predicted. LOL. No injunction no need for temporary order. I thought this was some sort of safety net. So in theory they can take on Vivint, but did anyone confirm news with banks? I see nothing.

[lepv123 0]

Odyd, do you think SUNE may have more hope now as things starting to clear up?

[Jetmoney 22]

13 hours ago, lepv123 said:

Disdaniel, bottom line is, do you think SUNE will go under? 

I have 50,000 shares currently at average 1.55. I may be crazy but I think that SUNE will be a big winner in the end once this debacle clears up. Looking for $7. 

Man, I was worry for you.  Do you also own other stocks as well?  I hope SUNE is not a major of your holdings.  I hope SUNE survive and its SP goes up good but I just don't trust its management especially Chatila.  Good luck friend.

[explo 610]

What happens to Abengoa as it fights to avoid bankruptcy is an example of what SUNE shareholders could face.

https://finance.yahoo.com/news/abengoas-top-shareholder-ready-big-213148676.html

http://www.bloomberg.com/news/articles/2016-03-04/abengoa-majority-shareholder-said-to-agree-to-cut-stake-to-5

Rescuing the parent by wiping out its shareholders is good for the yieldco.

 

[odyd 1,268]

I was trying to understand what SUNE is doing with last week's announcements. I think they are maybe looking for a legal precedence against damages sought by Vivint if merger does not happen. If they have responsibility to investigate and show due diligence in their finances than the breach of the responsibility to file to retain loans could be not avoided and used against them.

SUNE would say, although not having the financing is not a breaker of the merger, we had obligation to execute due diligence on our liquidity. This legal reason, which we cannot avoid caused loss of financing. This is different than not having one. Further if the new picture of the financial condition has SUNE not having money and of course not having financing, the only option is to seek damages by Vivint, as merger is not happening. How is Vivint going to get compensation from SUNE if the company would become bankrupt upon merger?

It can't. This is why yieldco shares could become real currency. Imagine SUNE sells B class to Blackstone, making that company a sponsor of TERP. Let's say this is about $500M in cash injected in SUNE. Now Blackstone cuts new deal, without overpricing it with TERP for the same Vivint assets set, call it at $1.50/watt. Vivint receives some $ $468M and TERP takes on the debt. No take/pay agreement are made for next sets, works the same right of refusal. SUNE of course still have the TERP agreements of first refusal.

SUNE is saved, TERP is saved and VSLR is saved. Blackstone owns probably what it always wanted to own. This is certainly a wishing well scenario, but I think yieldco shares will be the lifeline for SUNE drawn pretty quick.

[zendoc1love 44]

I agree that most likely we will see a deal as you have proposed. I think if Vivint  assets are at a fair price it would help out terraform.

And everyone else.

 

 

 

The yieldcos are definitely a huge asset .

[disdaniel 53]

Wondering what additional kick in the nuts to long investors of GLBL and TERP (and SUNE) that SUNE can deliver, it occurred to me that it is possible SUNE and VSLR decide to continue negotiating agreement (for an unspecified time) past March 18...

Anyone think this is remotely likely?  Would that just freeze share prices at whatever level they are at, or cause a big selloff in all?

[explo 610]

To me from the TERP perspective I don't care too much if they need to take on residential solar assets. The critical thing for me is that they don't take on more assets than they can carry cost efficiently and with reasonable leverage risk and that they don't take on assets at prices implying subpar IRRs for the asset type, i.e. if they get higher IRR at market level for riskier assets than lower risk assets I don't mind som higher risk assets in their diversified portfolio.

I find it a bit annoying that there isn't good IRR transparency among the yieldcos. Instead they talk about cash on cash return or whatever, which doesn't seem to be a calculation of total life return. I find comfort in that I'm buying the $25-38 per share money put into the company for single digits now and IRR has to be extremely poor (to unreasonable extent) for that to not be a good deal. Since the money put in have been used to buy value stable assets (unlike a poly plant) this view of what's been put in is quite solidly remaing in a cash to PV plant to cash conversion cycle of 20 years, where more cash than put into PV plant should come out of it unless IRR is negative, seems valid to me. Fear of parent "stealing" these $25-38 put in in IPO and a series of secondaries is what makes these around $25+ being offered below $10 now. 

[dk1 4]

On 3/4/2016 at 3:12 AM, lepv123 said:

Disdaniel, bottom line is, do you think SUNE will go under? 

I have 50,000 shares currently at average 1.55. I may be crazy but I think that SUNE will be a big winner in the end once this debacle clears up. Looking for $7. 

Like explo mentioned, SUNE fundamental business model is flawed...they said that they can become profitable by selling 4GW at 2$/W with 17% GM...if they can sell these at this rate...

But if look through these numbers, you see the problem. Why they need 4GW..reason is their high overhead...their overhead is around 700M...of course some of this will be variable and linked to project volume..but at 4GW this is 0.17$/W, for 3GW this will be 0.23 $/W...that is very high for a project developer...from my experience of working with UK and German developers, these guys work at less than 0.10 $/W overhead...so only way to compete with them is through lower cost of capital..and thats why yieldco was the only reason that allowed SUNE to operate..but with yieldco premium going up, this is not viable at least in forseeable future.

Then question is price of 2$/W...this is quite high especially now and for future projects..most of the new utility projects sell for 1.5 or below...in emerging markets of china and India, it can get to 1.3 or so...and I think that is the reason SUNE was pushing for commercial and residential segment..it has much higher ASP and allows for higer $/W.

Gross margin of 17% is reasonable, but again depend on the project location and selling price. FLSR gets gross margin of 18% or around with a more integrated business model...can SUNE achieve this with only EPC and project development..may be but so far their third-party sales dont support this.

SUNE stock is very volatile and likely to remain so...trading this you can make a killing if get right..but just be cautious as I see very little chance of it surviving...good luck!

[odyd 1,268]

Facts are that not having financing from the bank does not stop the merger. Doubts about liquidity and the presence of significant change make me think there is less liquidity to show on March 15th. It is a matter what sources of liquidity are most impacted, but no doubt what that means to cash.

Renegotiated agreement would have to take under the consideration lack of understanding on level of liquidity, therefore essentially eliminating SunEdison’s cash and funds from Term Facility as a result, unless another agreement is being negotiated with banks.  Moreover if the merger agreement is rewritten, this opens the review of purchase of assets by TERP. Knowing what happened last time, there could be desire to stop take/pay agreement to eliminate Tepper and further renegotiate the price per watt to reflect current market conditions. Can the entire transaction close in shares of SUNE plus the issue of bond to BX?

 

[odyd 1,268]

What is the value of the amended merger?

110M diluted VSLR shares times 7.89 per share, plus $3.30 in bond plus 0.12 share of SUNE and as many shares of SUNE as representing $0.75 per share so adding all together 7.89+3.30 plus $0.75 or $1.350B including 0.12 shares of SUNE.

[odyd 1,268]

If the agreement proceeded as per amendment with the option already exercised to pay public Vivint Shareholders in Cash, It would look like $400M in cash, and Blackstone would take $363M in bond and $572M in shares. At $1.79 it would mean some 320M shares or some 800M shares in total a 70% dilution. Originally they needed some $867M in cash. If TERP got $563M in cash here (rest is assumption of debt) they could still go on without $300M Term Facility. I wonder if the facility was also canceled for TERP as that would kill the deal. That would add $163M in cash plus $250M lending from BX. 800M shares would reverse split by 10, to 80M and things would start allover again.

 

 

[pg6solar 85]

Very informative. Thanks to all above contributing.

[zendoc1love 44]

An interesting article linked from SA:

https://www.snl.com/InteractiveX/article.aspx?cdid=A-35612844-12334&TabStates=0

SunEdison must take 'any and all actions necessary' to finance Vivint deal

[disdaniel 53]

Or what?  Blackstone forces SUNE into bankruptcy making the VSLR deal worthless?  I still don't see that happening.

 

[odyd 1,268]

11 minutes ago, disdaniel said:

Or what?  Blackstone forces SUNE into bankruptcy making the VSLR deal worthless?  I still don't see that happening.

 

SUNE cannot become bankrupt knowingly by taking on a merger. Merger would also lead to VSLR bankruptcy. Two options merger and no merger cannot have same outcome. This why not merging offers argument for survival. If merged entity was to be bankrupt as a result how would Vivint argue a compensation for not being insolvent?

SUNE will most likely delay beyond the date or close with massive dilution.

[zendoc1love 44]

I think close with massive dilution and loss of portion of Yieldcos.

[odyd 1,268]

I think owning yieldcos cannot be explained if SUNE has liquidity concerns. They would have sell them in my opinion as a first choice.

[lepv123 0]

1 hour ago, odyd said:

SUNE cannot become bankrupt knowingly by taking on a merger. Merger would also lead to VSLR bankruptcy. Two options merger and no merger cannot have same outcome. This why not merging offers argument for survival. If merged entity was to be bankrupt as a result how would Vivint argue a compensation for not being insolvent?

SUNE will most likely delay beyond the date or close with massive dilution.

Then would you agree that this is a bargain under $2? 

[kknd1234 90]

30 minutes ago, lepv123 said:

Then would you agree that this is a bargain under $2? 

It is not a bargain, for sune, it is either BK or double from the current price.