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SunEdison, without stakeholder support, faces winding path out of bankruptcy

SunEdison Inc. foresees a path out of bankruptcy, but it will have to navigate several remaining obstacles to get a reorganization plan across the finish line. The exit strategy hinges on Brookfield Asset Management Inc.'s proposed takeover of the SunEdison yieldcos TerraForm Power Inc. and TerraForm Global Inc., and the more than $800 million in cash and equity that the failed solar developer would receive if the deals close. However, unsecured creditors say they would be shortchanged by the plan, while a $231 million claim from affiliates of D.E. Shaw & Co. LP and Madison Dearborn Capital Partners could complicate its financing and implementation.

"[The] complicated financial pieces of the puzzle have been put in place and the remaining issues are fairly straightforward — who will get what share of the pie that the Debtors have created," SunEdison CEO and Chief Restructuring Officer John Dubel said in a March 31 court filing. "If a consensus resolution is not achieved, the road ahead will be difficult, costly, and time-consuming, but the Debtors are bound and determined to continue ... their efforts to drive consensus and reach agreement on the issues that separate their key constituents, if at all possible."

SunEdison and TerraForm Power are trying to investigate the claim from D.E. Shaw Composite Holdings LLC and Madison Dearborn Capital Partners IV LP, which stems from SunEdison's 2014 acquisition of First Wind Holdings Inc. D.E. Shaw and Madison Dearborn have said SunEdison and TerraForm Power both are liable for $231 million in remaining earn-out payments that became due when SunEdison filed for Chapter 11 protection last April.

"Without discovery, [D.E. Shaw and Madison Dearborn] will be in a position to interfere with the Brookfield Acquisition and its benefits to [SunEdison] and [TerraForm Power] stakeholders," SunEdison said in a March 30 filing in U.S. Bankruptcy Court for the Southern District of New York. Additionally, further investigation would help SunEdison value its assets, arrange exit financing and implement a reorganization plan, the company said.

More discovery

SunEdison also has been hit with complaints from unsecured creditors who say the money they would get from the yieldco transactions is insufficient. Meanwhile, SunEdison's secured lenders say the proposed allocation is "too high," Dubel said. The proposed allocation is based on SunEdison's assessment of potential claims that it could have made against the TerraForm companies had it not pursued the deals with Brookfield. SunEdison's Official Committee of Unsecured Creditors said it would pursue "extensive discovery" of the settlement.

In addition to investigating D.E. Shaw and Madison Dearborn, SunEdison asked a federal bankruptcy judge to allow discovery into EverStream Energy Capital Management LLC's decision to cut SunEdison out of an investment fund after SunEdison failed to meet a capital call in 2015. The EverStream partnership, a forerunner to the yieldcos that SunEdison ultimately used to try to supercharge growth, was pitched as a way to add "significant funding avenues," including third-party capital and the public markets.

SunEdison was required to periodically invest in the fund in exchange for a right to a percentage of profits and future distributions. But when EverStream Capital Management Managing Director Bruce Pflaum issued a capital call in mid-November 2015, SunEdison was facing a cash crunch and internal concerns about the accuracy of its financial statements. A notice of default arrived from Pflaum on Dec. 9, 2015, the same day SunEdison said it restructured a now-defunct bid for the rooftop solar company Vivint Solar Inc.

At the time of its bankruptcy filing, SunEdison had invested approximately $19 million in EverStream Solar Infrastructure Fund I LP. SunEdison said EverStream, which has asserted $4.5 million in secured and unsecured claims in the bankruptcy case, did not provide "adequate notice" for its November 2015 capital call.