SunEdison and its yieldcos in settlement discussions

Written By: Stratton Report
October 3, 2016

sun edison

On October 3, SunEdison announced that settlement discussions with the company’s sponsored yieldcos, TerraForm Power, Inc. and TerraForm Global, Inc. have commenced, and will deal with both alleged claims asserted by the yieldcos against SunEdison, as well as claims that the SunEdison estate may assert against the yieldcos.

SunEdison also noted that it is collaborating with the yieldcos to sell either SunEdison’s ownership interests and other rights in the yieldcos and that any transaction resulting from the sale process will require the approval and consent of SunEdison and approval of the bankruptcy court.

John Dubel, SunEdison’s Chief Executive Officer, observed:

Suned”Our Chapter 11 process has been long and complex and we are now at a critical stage as it relates to the Yieldcos. We take to heart Jack Stark’s comments that a settlement of disputes between the Yieldcos and SunEdison is overwhelmingly in the interests of both sides, and we will proceed with our settlement discussions while at the same time moving forward with the sale process.”

The claims by the yieldcos were described in a press release of September 25, 2016.

Per the release, these included the claim that SunEdison’s failure to perform under the integrated sponsorship arrangement put in place at the time of TerraForm Power’s IPO constituted a material breach which, if not remedied, excused TerraForm Power from payment or performance of its contractual obligations under the sponsorship arrangement; that absent remedy of all material sponsorship defaults, TerraForm Power was not obligated to exchange SunEdison’s ‘B Units’ in TerraForm Power LLC and ‘B Shares’ of TerraForm Power, Inc. for class A common stock of TerraForm Power; that SunEdison had not met the conditions necessary to receive distributions on the B Units due to the limitation on sponsor distributions in the TerraForm Power LLC Agreement; that transfer of the B Shares of TerraForm Power, Inc. was prohibited by its corporate charter during or after SunEdison’s bankruptcy; and that TerraForm Power has claims against SunEdison that are estimated to be in excess of $1.0 billion.

Jack Stark, Chairman of the Company’s Corporate Governance and Conflicts Committee noted:

“TerraForm Power has lost a large part of its enterprise value as a result of SunEdison’s catastrophic breach of its sponsorship and legal duties. We are prepared to enforce our rights and defenses in litigation if necessary, whether in bankruptcy court or elsewhere. However, we also recognize that resolving our relationship with SunEdison in the courts would be complicated and expensive. A settlement is overwhelmingly in the interests of both sides. We have met with SunEdison to start settlement discussions in the hope that we can resolve these matters on a schedule that allows the collaborative exploration of strategic alternatives for TerraForm Power in the best interests of all stockholders.”