Appaloosa Management Calls for Probe of SunEdison
May 03 2016 - 6:20PM
Dow Jones News
David Tepper's Appaloosa Management LP is calling for an
independent bankruptcy probe of SunEdison Inc., the solar-power
project developer that filed for chapter 11 protection amid failed
deals and federal probes.
Appaloosa is a shareholder of TerraForm Power Inc., one of two
companies spawned by SunEdison as part of the financial engineering
that fueled its growth.
Beginning last year, SunEdison's finances began declining almost
as swiftly as they had grown, as investors lost confidence it would
be able to cover a mounting pile of debt with profits from
alternative energy projects.
Appaloosa helped push SunEdison down the path to bankruptcy with
Delaware court action over a $1.9 billion merger with Vivint Solar
Inc. that involved TerraForm Power. The deal was scrapped earlier
this year after banks balked at providing the funding.
Litigation continues, with Appaloosa seeking permission to
unseal papers from the Delaware case. Bankruptcy creditors would
like to know what the hedge fund found out about SunEdison's
activities last year, when it was seeking to save the Vivint deal,
lawyers for the hedge fund contend.
"Appaloosa has become familiar with the questionable prepetition
conduct of SunEdison's senior management symptomatic of the myriad
reasons why the appointment of an examiner is appropriate in these
cases," lawyers for the hedge fund wrote in a filing Tuesday in a
New York bankruptcy court.
Representatives of SunEdison and affiliates TerraForm Power and
TerraForm Global Inc. declined to comment.
In an unusual move, SunEdison asked on the first day of its
bankruptcy proceeding to have an examiner appointed. Judge Stuart
M. Bernstein delayed a ruling on the request from the company,
which followed on the heels of admissions from SunEdison that it is
being investigated by the U.S. Justice Department and Securities
and Exchange Commission.
The Justice Department and SEC are looking into SunEdison's
prebankruptcy dealings, issues that are also expect to get the
attention of creditors.
According to Appaloosa, the limits SunEdison wants to impose on
the bankruptcy examination, including a $1 million budget and
60-day timeline, would inappropriately restrict the work. "There is
no reasonable basis to include an upfront limitation on the fees
and expenses an examiner may receive," Appaloosa's lawyers
wrote.
The hedge fund says SunEdison's creditors need a voice in the
selection of an investigator, and the investigator should have more
time and the budget necessary for a thorough look at SunEdison.
SunEdison's newly appointed official committee of unsecured
creditors has yet to weigh in on the crucial question of a
bankruptcy probe. Vivint, one of the takeover targets left in the
lurch by SunEdison's financial fall, holds a seat on the panel.
The official creditors committee has hired two bankruptcy
powerhouses, Weil Gotshal & Manges LLP and Morrison &
Foerster LLP, to represent it in the SunEdison bankruptcy
proceeding.
TerraForm Power and TerraForm Global are SunEdison "yieldcos,"
companies set up to buy completed alternative power projects
developed by SunEdison, with cash from outside investors. They
haven't filed for bankruptcy protection, and they say they are
financially sound on their own despite having their growth
prospects limited by SunEdison's troubles.
The TerraForm companies have put in an appearance as creditors
of SunEdison, and are a potential sources of value for creditors.
Before the bankruptcy, TerraForm Global sued SunEdison, accusing it
of shoring up its shaky finances with money intended for projects.
SunEdison has denied wrongdoing.
The company, the world's largest renewable-energy developer, was
valued at nearly $10 billion as recently as last summer, but had
only about $18 million in cash on hand at the time of its chapter
11 filing.
Write to Peg Brickley at peg.brickley@wsj.com and Tom Corrigan
at tom.corrigan@wsj.com
(END) Dow Jones Newswires
May 03, 2016 18:05 ET (22:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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