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SunEdison Bankruptcy Watch: YieldCos’ CEO Abruptly Exits

Brian Wuebbels late Wednesday stepped down as CEO of TerraForm Power ( TERP ) and TerraForm Global ( GLBL ), as parent company SunEdison ( SUNE ) is on the brink of default. Both TerraForm Power and TerraForm Global said the respective board of directors had formed an “office of the chairman” to run the concerns on an interim basis. Meanwhile, David Tepper’s hedge fund, Appaloosa Management, which owns 9.5% of Terraform Power, sued the yieldco and SunEdison in Delaware’s Chancery Court, demanding that TerraForm overhaul its Conflicts Committee, claiming controlling shareholder SunEdison has breached its fiduciary duties. Appaloosa Management in January sued SunEdison, saying it violated its fiduciary duties as it pursed its now-defunct effort to acquire Vivint Solar ( VSLR ). Also late Wednesday, S&P Dow Jones Indices said that WebMD Health ( WBMD ) will replace SunEdison the S&P MidCap 400, saying SunEdison no longer has a market cap to qualify for the index. Earlier, JPMorgan downgraded TerraForm Global, while FBR suspended coverage of the “unpredictable” SunEdison. SunEdison hasn’t released financials for beyond Sept. 30 and is in danger of default. Late Tuesday, TerraForm Power said there was “substantial risk” of a SunEdison bankruptcy, which might make its own talks with creditors “more difficult.” SunEdison stock plunged as low as 45 cents on Wednesday, but closed up 2 cents to 59 cents. TerraForm Power fell 2.7% to 8.38 but rose 3% late. TerraForm Global climbed 7.4% to 2.18, then advanced 7% in late trade. Vivint Solar rose 6 cents to 2.62.

TerraForm Global Distances From SunEdison On Bankruptcy Risk

Yieldco TerraForm Global ( GLBL ) distanced itself late Tuesday from parent SunEdison ( SUNE ), noting “substantial risk” that SunEd might soon file bankruptcy and thereby complicate ongoing negotiations with TerraForm’s creditors. Meanwhile, JPMorgan downgraded sister yieldco TerraForm Power ( TERP ) stock Wednesday, and FBR suspended coverage of “unpredictable” SunEdison stock, which hasn’t updated its financials since Sept. 30. In morning trading on the stock market today , SunEdison stock lit up 8%, but it still trades at just 60 cents. TerraForm Global stock was up 1%, just above 2. TerraForm Power stock was down a fraction, near 8.50. Late Tuesday, TerraForm Global said that it expected to delay its annual 10-K filing beyond the Wednesday deadline. SunEdison and TerraForm Power also have until Wednesday to file their 10-K paperwork, which both have delayed. Both TerraForms rely heavily on parent SunEdison to complete financial reporting. SunEdison first delayed its 10-K during an investigation into its liquidity stance . This month, SunEd said that deficient IT controls had snagged the process. SunEdison might seek bankruptcy protection, TerraForm Global wrote in an 8-K filing. TerraForm Global says that it could operate without SunEdison, but the company’s creditors want its 10-K by Wednesday. “In the event SunEdison seeks bankruptcy protection, TerraForm Global will have sufficient liquidity to support its ongoing operations,” the yieldco wrote in the 8-K filing. “We are in active discussions with our revolving credit lenders to obtain an extension with respect to the required delivery of our Form 10-K.” The company added that SunEd’s potential bankruptcy filing would make TerraForm Global’s negotiations “more difficult and time consuming.” SunEdison, too, is likely in discussions with creditors of $725 million in second-lien loans, according to a Wall Street Journal report. If SunEdison can’t file its 10-K by Wednesday, “their fate lies with the lenders,” S&P Capital Global Market Intelligence analyst Angelo Zino told IBD on Monday. TerraForm Global is largely wrapped in power purchase agreements (PPAs) that wouldn’t allow it to terminate the contracts or accelerate debt maturity if SunEd files bankruptcy. A handful of PPAs in India and South Africa do have provisions in the case of a SunEd bankruptcy. SunEdison is on the hook for 98.9 megawatts in South American and Bora Bora projects. Per the agreement, SunEd must drop the projects to TerraForm Global upon completion or, if they’re not completed by July 31, drop substitute projects of equal value into the yieldco. And several projects in India could sting SunEdison. TerraForm Global prepaid $231 million in November for equity interests in 425-MW projects in India. If SunEd can’t wrap the projects, TerraForm Global says that it will go after the prepayment.

SunEdison Bankruptcy Whispers Char SolarCity, First Solar, SunPower

SunEdison ‘s ( SUNE ) inferno continued Wednesday, a day after rumors flared that it might be in debtor-in-possession talks with creditors — often seen as a precursor to a Chapter 11 bankruptcy filing. In the stock market today , SunEdison stock plunged 15% to 1.27 and near its all-time low of 1.21 touched on Feb. 26. Shares have crashed 96% since July 20, when SunEd announced a bid to acquire installer  Vivint Solar ( VSLR ). Shares of Vivint Solar and of SunEd yield company TerraForm Power ( TERP ) fell 11% and 3.8%, respectively. The conflagration also charred SolarCity ( SCTY ), SunPower ( SPWR ) and First Solar ( FSLR ) stocks, which tumbled 10%, 7.6% and 4.3%, respectively. More broadly, IBD’s 21-company Energy-Solar industry group felt the burn, falling a collective 4.3%, its biggest single-day drop since Feb. 11. Axiom Securities downgraded SunEdison stock to a sell rating and lowered its price target to 22 cents from 39 cents. Intraday, Stifel Nicolaus suspended its rating on SunEdison stock. On Tuesday, SunEdison executives declined to comment on “market rumors and speculation.” SunEd is reportedly negotiating with holders of $725 million in second-lien loans, according to a report by Debtwire, cited by Reuters. SunEdison’s woes tie back to its plan to acquire Vivint Solar in July, S&P Global Market Intelligence analyst Angelo Zino told IBD earlier this month, after Vivint scrapped its sale to SunEd on financial worries. At the time, SunEd’s banks were reportedly hedging on the deal. SunEdison and TerraForm Power had just delayed their 10-K filings amid an ongoing investigation into SunEd’s liquidity stance. Now, TerraForm Power faces possible delisting after falling out of Nasdaq compliance, as well as a potential slew of investor class action lawsuits . Four law firms are investigating whether TerraForm Power violated securities laws.