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I printed your earlier "analysis" before you edited it out and totally disagree with your assessment. SUNE's failure can be attributed solely to consistently poor operating cash flow and management's misuse of all the debt and equity they raised last year to go on a buying binge instead of using the funds to finish uncompleted projects. Wall Street may be quick to raise capital, and lots of it, to reward promising companies but they are equally quick to punish those companies that don't deliver on their promises. Focusing on the Balance Sheet to make investment decisions is a mistake made by novices. The success of a company is driven by its organic Cash Flows and Income Statement.
How is the Appaloosa Settlement a good thing for SUNE? TERP agrees with its own stockholder that it WILL begin to prepare its own financials and seek greater independence on its Board. But SUNE has voting control of TERP (Class B shares) and currently provides all of TERP's (zero employees) business functions. Unless TERP pays SUNE to give up control what incentive does SUNE have to do anything? Given the vitriol between the two companies I don't see any benefit inuring to SUNE.
Great! I hear the paper stock used for the certificates is as good a quality as most residential wallpapers. Bathroom or bedroom?
You are wrong again. The $80MM is for the Stalking Horse #2 deal where the auction produced no viable bids for the 22 projects, i.e. premiums. This deal has been out there since August.
A friend teaches finance at an MBA program. He is always looking for new material. As a retired corporate banker, I am always looking for projects to keep me busy. Sarbanes-Oxley failed here. I want to document the whole chronology.
I spent +30 years specializing in energy project finance. SUNE broke almost every rule to prudent business management in this sector. Their balance sheet was ballooned by consistently paying above market prices using other peoples money. Given the current dearth of tax equity in today's market the tax equity that is out there wants big premiums which means rock bottom purchase prices for SUNE's assets. SUNE will not be reborn which means Commons will get nothing unless lawsuits for fraud prevail.
Nah. The green energy cultists are like some passengers on the Titanic. The ship can be vertical and going down and they will always believe it can't sink. At this point it really doesn't matter. Anyone holding stock after the CH 11 filing will lose everything so holding out for hope is not a bad thing. Besides, I follow this for the entertainment value and I am writing a case study on SUNE all the way thru final liquidation. The cult postings make for comic quotes.
You are never going to know the actual debt outstanding until SUNE returns to GAAP financial reporting (sometime in Dec). However, the picture isn't pretty when you consider the cumulative MOR's thru July show Net Losses of $632MM and New Unpaid Post-Petition Debts of $767.7MM. Total Cumlative Cash Receipts of $515.5MM (which includes $300MM in DIP LOC drawdowns) less Disbursements of $350MM means SUNE is in a deeper hole then when they filed on April 21st. If the yieldcos get priced based on their current 1H2016 cash flows their current market prices will be discounted.
“15. Because the Intercompany Debt exceeds the Enterprise Value” (i.e. "the Sales Value"). The preceding quote was contained in this mornings order issued by the Judge approving the sale of a U.K. deal. Does anybody recall seeing Intercompany Debt in any MOR? Could this be the contra-account buried in the Stock Holders Equity to offset the Intercompany Receivables which in the last MOR was at $7.4 billion? An explanation of this dichotomy would be appreciated.
Penknee is correct. "Acceleration" clauses are boiler plate provisions in loan agreements. But for the reading impaired, SUNE's "Senior Secured Superpriority DIP Credit Agreement" dated April 26, 2016 states in Events of Default in Section 8.01 the first item "(a) Non-payment" definition and in Section 8.02 Remedies Upon Default where "(a)" no more loans will be made and "(b)" the lenders make the declaration that ALL amounts outstanding are immediately due and payable. The DIP lenders do not care about what happens to SUNE after they are paid out in full. They are not in the business of chasing rainbows.
STRIKE 2! Auction number 2 is over. SUNE is asking the Court (Docket #1222) to approve Stalking Horse bidder SoCore MN's original bid. There will be no bonus or premiums.
Several of the culprits responsible for SUNE's travails have already hung up a new shingle: http://www.longroadenergy.com/investors/
Non-recourse debt at the project level is excluded from bankruptcy liabilities numbers since it is not SUNE's obligation. The bankruptcy judge prudently treated it as such. However, it shows up in SEC filings for financial reports since it is required by GAAP. The MOR financial opinions to date have specifically stated that they do not use GAAP accounting for the bankruptcy. The original news reports for the India Greenko deal stated a "gross" purchase price of $1.2 billion with SUNE getting about $100 million in cash. Included in the gross purchase price was Greenko's assumption of non-recourse debt and liabilities at the project level, or about $1.1 billion. So the only cash SUNE gets to pay off its bankruptcy "Liabilities" is the $100 million. The MOR's contain Cash Flow projections based on expected events and schedules. Why do you think they look so bad into mid November when deals, e.g. the India Greenko sale, have been known for many weeks and are included in the projections? It is unfortunate that you do not understand the differences in the accounting methods since the consequences can be costly.
You just don't get it. SUNE isn't in the driver's seat with its sales. The DIP secured lenders are and they have time constraints on their backs to get "optimum" values not maximum values. Watch the Stalking Horses win every deal they signed up for. There will not be any premiums coming out of auctions.
Look at the Stalking Horse agreement with GCL-POLY. SUNE is selling all of its solar materials business including its technology and intellectual property. The patents go with the sale.
Due to the performance bonuses built into the contracts for the sales of assets you will not see commons cancelled for years. It will just sit there much like Enron did.
It is just hyperbole based on two fundamental premises: First, SUNE is in fire sale mode to dispose of ALL of its core assets. Once they are gone there will be no core business, revenue or cash flow; and second, renewable energy development is a capital intensive business which requires huge amounts of upfront cash to do the pre-development groundwork. Lenders will not fund projects naked and new equity will never share with old shareholders for a previously failed business model. So SUNE will go nowhere without huge infusions of new cash and new equity will only fund it if the old shareholders are gone.
Please keep up with the Court docket. The first auction is over. SUNE is recommending to the Court that the original NRG bid be accepted. The 2nd auction bids are due this Friday. Expect the same result which will be reported on the 20th. SUNE has tight limitations to what it can accept from bidders. Do not expect any premiums or bonuses from the auction process.
You could add an additional caveat to your warning. It is common for the Court to rule in CH 11 cases, e.g. Enron where the company does not survive as a going concern, that any recoveries after satisfaction with all other creditors will only go to shareholders of record prior to the bankruptcy filing date. So it is most likely that shareholders of any purchases of stock post-bankruptcy will only have a chance at receiving value if SUNE survives as a going concern. Given the sales of all their key assets, their tarnished reputation amongst financing parties (i.e. the damaged relationships with bankers) and departure of key personnel their survival in the energy development business is beyond comprehension.
The CFO stated the MOR did not conform to GAAP. There are $7.4 billion in "intercompany receivables" on the MOR books.
Per FASB, “The intercompany transaction must be removed when preparing the consolidated entity’s financial statements because, as discussed in ARB No. 51:“
"The purpose of consolidated statements is to present, primarily for the benefit of the shareholders and creditors of the parent company, the results of operations and the financial position of a parent company and its subsidiaries essentially as if the group were a single company with one or more branches or divisions."
When the intercompany receivable is netted out SUNE is at least $1 billion in negative equity.
More news. Both TERP and GLBL received SEC notices yesterday (8-K filings) that they were to be delisted September 19th unless they could show cause as to their failure to file audited financial reports. They have had 6 months to comply with late filing requirements but are still too reliant on SUNE for bookkeeping. The lack of independence could drag both companies into SUNE's bankruptcy mess. The notice can't help their stocks' value.
Strike 1! The NRG Stalking Horse auction has been completed and SUNE will seek Court approval 9/15 per Docket #1154 to complete the sale as previously petitioned (Docket #942). SUNE gets $144 million cash for +2,000 MW of projects under development, or approximately 40% of its April 2, 2016 pipeline portfolio. There will be no "premiums" from an auction.
Good for you! I like your style. Post-scripts can be very educational. I am here for the same reason. Sometimes the details of the unraveling can be the best source as to the cause of a company's demise. Good Luck to your future endeavors!
Forget the news report. Read today's 8-K filing. The potential revenue from assets sales is a gross number before deducting for projects' debt and other liabilities. The most recent SUNE Court filings show that project sales are generating little to nothing in cash to SUNE after deducting for third party obligations. This has become a consistent pattern for SUNE asset sales. Look at their current cash flow projections and compare them to last April's: they are looking at September month end cash balances that are +$400 million less than what they originally showed the DIP lenders. The only hope for SUNE is a bonus on the sales of TERP and GLBL and that is not a strong prospect given they have not provided audited financials since 2015.
49%? Please identify which project(s) where there is a bona fide offer on the table for less than 100% of SUNE's interest. Every filing with Court I have read is for a sale for ALL, and not less than ALL, of the assets for a project.
If you are looking for "premiums" you are in the wrong place. SUNE filed two motions with the Court 9/1 seeking approval for sales. Rocksprings Wind has a "Book Value" of $31.4 MM is being sold for $13 MM cash of which $11 MM will pay off a non-DIP drawn Letter of Credit. Waycock Road (UK) has a "Book Value" of $14.3 MM is being sold for $9.0 MM cash of which $6.0 MM will go toward paying off non recourse debt and the balance goes to the project's vendors. The only time SUNE is going to see any "premiums" is when they have already written off their assets to zero.
And what happened to the $3.1 billion in "Non-controlling Interest" equity that disappeared from the 9/30/15 Financial Statements? The equity in the First Wind Oakfield Planatation wind project was sold to Terra Nova of J.P. Morgan last December. Yet, SUNE is showing sole net equity of $72.5 million. I think these MOR financial statements are completely untrustworthy and misleading as to the real financial position of SUNE.
Your post #27174: I originally thought this would go CH 7 but after reading all the PSA's this is going to sit out there under CH 11 for years. Almost all of the Purchase and Sale Agreements contain little "bonus" amounts to SUNE 1, 2 and 3 years down the road once a completed project hits certain minimum performance targets. This will require the Bankruptcy Trustee to stay around for years and collect any cash to distribute to unsecured creditors. Unless, of course, the rights to the bonuses are also sold off.
The SEC has very strict rules on insider information. Greenlight's issue before Ms. Gogel's appointment was the lack of Board independence and the company's direction. Once they got a voice at the table the issue became moot. While Greenlight is, as I said before, irrelevant now it is likely that once they learned what was happening on the inside due to the absence of public information their hands were tied. Forget Greenlight. They do not matter any more since the DIP lenders control the bankruptcy process.
Ms. Gogel was appointed to the Board in January before the stuff hit the fan. Her continued membership on that Board has no conditions of maintaining any ownership by Greenlight. At this point any ownership, large or small, by Greenlight is irrelevant. Ms. Gogel now has an individual obligation to fulfill her term on the Board. To leave prematurely would be a personal mark against her sitting on any other company Boards.
Sunedison has no cash and any cash they get goes to third parties. Your idea they will be able to fund projects is a pipe dream. See yesterday's Court filings. Docket #1105: Rocksprings on SUNE's books for $31.4 MM gets sold for $13 MM and SUNE gets no cash. Docket #1106: Waycock, UK on SUNE's books for 10.8 MM Pounds gets sold for 6.8 MM Pounds and SUNE gets no cash. This bankruptcy is a liquidation. Everything must go and is being sold to the highest bidder. At the end of the day there will be no assets of value on the books.
So all "premiums" are the same? If Sunedison sells 1,000 MW of projects for cash of $100MM where the buyer(s) assumes all of the liabilities at the project level then you think Sunedison made a profit/premium of $100MM?
Bond holder's "understanding" was purchased for $6.25 MM in upfront fees plus an additional 300 basis points on the debt rates ($9.375 MM in interest cost) thru the next due date for the financial reports. You conveniently left out the pay to play part.
Did you miss the part when SUNE changed its business? When the new CEO and CFO were hired the filing stated that their mission was to sell all, or almost all of the company's assets. Their comp plan incentivizes them to do just that. SUNE isn't developing and constructing any new projects anymore. In fact, many of their projects are getting cancelled due to missed construction deadlines. And many of the proposed sales under bankruptcy are contingent on not losing the underlying PPA's. If you are going to stick to a premise at least be consistent. The business has changed.
My back-of-the-envelope numbers using the GCL-Poly filing and the last MOR shows GCL pays $150MM cash plus assumes the third party liabilities of the 4 companies to be acquired which own +$2 billion in assets. That's 7.5 cents on the dollar. The cupboard is getting cleaned out pretty fast and there isn't much to show for it.
There have already been too many bumps. The patient(s) has been concussed and delirium has set in.
SUNE's top R&D talent have already moved onto greener pastures so who and why would anybody fund their R&D when there are so many other companies in a better position to develop new technology. If there is anything of value remaining in the company it will get sold off like all the other assets. All that will be left is a worthless shell.
Why would anybody buy a bankrupt company with remaining assets of no consequential value, a huge pile of unpaid debts and SUNE's name (tarnished beyond repair)? The only way the company could stay in business is if they prepaid for everything and nobody is ever going to lend them a dime again.
Very poor news reporting. The NRG net payment to SUNE is $144MM not $188MM. The difference goes to creditors of the projects directly as stipulated in the PSA. The amount of Zero Percent of Completion of projects in the portfolio to be sold to NRG is 1,106 MW out of the 2,100 MW (see 4-2-2016 Pipeline Report for projects 1 thru 16). The deal in Texas has already been rejected by TERP under their buy/sell agreement with SUNE because it is unfinished and way behind construction schedule. As far as NRG enhancing their portfolio and yieldco, it may happen if they pay a rock bottom price. TERP is also dumping low yield projects it was forced to buy by SUNE including its entire UK portfolio plus other US assets. SUNE has put virtually no money into projects under construction since filing CH. 11. If the deal with NRG is the cream in SUNE's portfolio it doesn't bode well for the rest of their portfolio.
Both the SEC and DOJ launched investigations in March 2016. If they had found anything criminal they would have interrupted the bankruptcy proceedings by now and petitioned the Court for lawful consideration. It is highly likely that they found what SUNE's internal investigation found which is no wrongdoing but incompetence (my interpretation of their stated findings). "Incompetence" is a euphemistic term for "they (management= Chatila & Wuebbels) didn't have a clue as to what they were doing" because they had no experience in the energy project development business. For example, you don't pay $2.5 billion for a company (First Wind) that at the time of sale had less than $100 million in equity, +$650 million in Accumulated Deficits and had never shown a profit. NO profits! Ever, after +7 years in business! The government will expend no funds to do other than what they have done so far because they have no cause to do so and there is NO MONEY to be found after the secured creditors get paid.
You are reading it correctly. There will be no historic chronological financial report. Sorry to see you got caught in the SUNE cesspool. This is bankruptcy. Bankruptcy is about repaying secured creditors and leaving the crumbs for the other creditors and shareholders. Those secured creditors don't care about financials anymore. Only monetization of assets ASAP. When SUNE finally reports the only financial data you will see are for those SUNE entities that still exist on paper. SUNE tried to build a new accounting system in 4Q2015 for +2,000 legal entities which failed just as its performance wheels were falling off. When you look at all the current offers on the table for assets the net sums to SUNE are paltry. Shareholders only chance at recovery is thru lawsuit(s) which must prove malfeasance or fraud. The government has already said there is nothing there and incompetence doesn't qualify. Read between the lines: when was the last time a company entered CH. 11 without filing a Reorganization Plan on the bankruptcy filing date? Ignore the "longs". They not only do not understand GAAP accounting but they do not understand the caveats and disclaimers in the opinions of auditors and authorized financial personnel.