Sunedison Recovery Calculations Just 'Guesswork,' Sterne Agee CRT Warns

Sunedison Inc SUNE and 25 of its domestic and international subsidiaries filed for bankruptcy protection in the Southern District of New York. The exceptions were TerraForm Power Inc TERP and TerraForm Global Inc GLBL.

Sterne Agee CRT’s Kirk Ludtke mentioned that the debtors comprising of Sunedison and 25 subsidiaries filed a motion for the approval of a $300 million debtor-in-possession facility. The DIP, if approved, will be jointly provided by some of the Debtors’ prepetition first lien [$125 million] and second lien [$175 million] lenders.

“The Debtors’ liquidity will remain, in our view, limited absent material asset sales,” the analyst wrote.

DIP Conditional

Ludtke noted that the DIP was conditional upon the eventual roll-up of the Debtors’ $750 million first lien revolving credit and $350 million of the Debtors’ $950 million second lien debt. The analyst expects this to be resisted by competing creditors on several grounds:

• The amount of prepetition debt to be rolled into post-petition debt actually exceeds the amount of new money to be provided
• The DIP would take liens on certain assets that are currently unencumbered

The proposed liens on currently unencumbered assets, which are an important potential source of recovery for the Debtors’ secured creditors, will likely be contested.

Ludtke added, however, that the DIP is likely to be approved, given the complexity of the case, the Debtors’ limited liquidity, and the downside to recoveries if key stakeholders, especially the counterparties to the PPAs, lose confidence that the Debtors are adequately funded.

Sunedison’s recovery calculations are “largely guesswork,” Ludtke commented.