SunEdison Inc (NYSE:SUNE), better known these days as the “Wall Street nightmare stock,” has reached a legal settlement with Latin American Power (LAP). The solar energy firm was met with a lawsuit after it had to walk away from a $733 million deal. SunEdison had LAP in its acquisition sights, but then backed off because of plummeting stock values and investors frightened of its future.
SunEdison Inc Settles Lawsuit, Future Still in Doubt
Last summer, SunEdison was interested in purchasing Latin American Power. The firm owns several clean energy projects in Chile and Peru, many of which are wind and hydro plants. This was part of SunEdison’s barrage of buying companies and projects to expand its portfolio.
In October, the solar firm said that it would not move ahead with the deal. It also noted that it was working on ways to renegotiate or back off from other deals amid falling shares. This prompted LAP to file a lawsuit to prevent SunEdison from allocating assets outside of its primary business, which led the judge to establish a temporary restraining order. LAP sought $150 million for the failed deal.
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The $28.5 million settlement helped shares climb 20 percent during Friday’s trading session.
SunEdison Inc (NYSE:SUNE) decided to settle last week for one-fifth of the arbitration amount. Reportedly, the lawsuit outlined the solar firm as “teetering on the edge of bankruptcy.” The description may not be too far from the truth.
It was discovered last week that the firm was conducting an internal inquiry into its finances after a number of current and past employees started to question its liquidity positions. Some financial experts are doubtful of the firm’s finances so they have downgraded the stock.
Moreover, its dividend payment is going to be delayed, and other Wall Street experts have been open about their concerns over its high debt volumes. SunEdison, too, has been transparent in their high levels of debt since they have sold off many divisions and projects to pay off the debt.
Year-to-date, SunEdison shares have collapsed 63 percent. Over the last 12 months, shares have been virtually wiped out by 92 percent and sit in penny-stock territory.
Banks Are Spooked by SunEdison
There was celebration at SunEdison last week when a judge threw out a David Tepper case that would block the company from acquiring Vivint Solar (NYSE:VSLR). The stock pushed upwards after the news broke. But it may not be all sunshine and lollipops.
Banks that were going to be initially providing SunEdison with loans to complete the $1.9 billion purchase of Vivint Solar may actually walk away. Goldman Sachs, Citigroup, Barclays and UBS Group “have balked at providing loans” to the firm due to the lack of financial information.
SunEdison officials say they have yet to find anything wrong with the books. But that hasn’t stopped analysts from wondering if the clean energy firm is truly on the brink of insolvency.
So, do the banks know something that the rest of us don’t?
If a deal isn’t reached by Mar. 18 then both companies can walk away from the deal.
The firm is expected to report its quarterly earnings Wednesday.