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SunEdison Inc (SUNEQ) Creditors Look at ‘Friday Night Massacre’

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SunEdison Inc (OTCMKTS:SUNEQ) had a rough November. After being awarded a billion-dollar loan, credits say the solar firm shouldn’t be in charge of those funds. Referring to its “Friday Night Massacre” late last year, creditors are urging a judge to take another look.

SunEdison Inc’s ‘Friday Night Massacre’

The Chapter 11 bankruptcy protection proceedings are giving us an inside look at the firm. There is one specific period that is giving us incredible insight. And that was in November, a time that continues to hurt the solar firm.

SunEdison Inc (SUNEQ)

During an 11-day period in November, SunEdison withheld details about a margin-loan deadline, misrepresented its financial health and got rid of several independent directors at its yieldcos. This all came as the firm wanted funds to make a looming payment.

On the “Friday Night Massacre,” SunEdison changed the boards on its two yieldcos – TerraForm Power Inc (NASDAQ:TERP) and TerraForm Global Inc (NASDAQ:GLBL). These new boards then modified their conflicts committees. SunEdison’s then-CFO Brian Wuebbels became CEO of the yieldcos.

These moves prompted many creditors to compare SunEdison to Enron Corp. However, Jay Goffman, the firm’s lead bankruptcy lawyer, says the accusations are just “gamesmanship and false statements.”

Others note that the moves made by SunEdison show it was trying to save itself.

“That’s when it became clear that SunEdison was willing to do whatever it took to save itself,” said Michael Morosi, an analyst at Avondale Partners LLC. “The turmoil with management, the turnover of the board, that’s when it became clear that the yieldcos were being viewed as a source of liquidity.”

Because of this, creditors say it should not hold on to a $1.3 billion operating loan. What happens to these funds will be answered on Jun. 21, when a court convenes to decide what to do with the money.

Judge Approves $1.3 Billion Loan for SunEdison Inc

Last week, a judge approved a loan that will help SunEdison maintain operations during its bankruptcy proceedings. With 1,000 global operations and about 3,000 workers, the $1.3 billion operating loan will prove to be a necessity.

The funds won’t just be used to keep its doors open. A part of the $1.3 billion loan will be used to pay for a probe by creditors to look into its financial activities and wrongdoings. The findings will likely affect the outcome of the lawsuit.

“Our decision to initiate a court-supervised restructuring was a difficult but important step to address our immediate liquidity issues,” said Ahmad Chatila, SunEdison CEO, in a press release. “As a result of this process, we expect that SunEdison will be in an even better position over the long term to utilize our capabilities in the renewable energy sector.”

Due to more than $16 billion in debt, SunEdison filed for Chapter 11 bankruptcy protection in late April. It filed in Bankruptcy Court for the Southern District of New York. Despite its filing, SunEdison will sustain operations, while its yieldcos will be unaffected.

Its restructuring agent is in the process of selling off its more than 500 assets. Reports suggest that SunEdison may already have buyers in Hawaii and India. Funds generated from the sale of its assets will be used to pay back its creditors and lenders.

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Andrew Moran

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