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Vivint Solar's pursuit of SunEdison in bankruptcy seen as unlikely to succeed

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Essential Energy Insights - February 2021

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Vivint Solar's pursuit of SunEdison in bankruptcy seen as unlikely to succeed

Theodds are long that Vivint SolarInc. will be allowed to pursue a lawsuit against while the bankruptrenewable energy developer is reorganizing in federal court, according to BruceMarkell, a professor at Northwestern University's Pritzker School of Law and aformer judge for the U.S. Bankruptcy Court for the District of Nevada.

VivintSolar, in a July 7 motion in U.S. Bankruptcy Court for the Southern District ofNew York, said itsclaim against SunEdison for breach of contract is so large, estimated at up to$1 billion, that the exact amount needs to be determined to lay the groundworkfor Chapter 11 negotiations.

Thebankruptcy court's procedure for estimating claims "would not do justiceto the magnitude" of Vivint Solar's case, the company argued. It saidfailing to liquidate the claim in Delaware Chancery Court "would leave solarge a range of possible values as to prevent other unsecured creditors fromcalculating the value of consideration that they will receive under a proposedplan with any precision."

Markellcalled the request "unusual" and "a thinly veiled statement ofdisrespect to the bankruptcy court, and its process and procedure."

"Idoubt the bankruptcy court will grant the motion," Markell wrote in anemail July 7. "The general rule is that unsecured creditors do not getstay relief. The bankruptcy court will determine their claims."

Alawyer for Vivint Solar did not immediately respond to a request for commentJuly 8. Vivint Solar said in a filing that it would be open to expeditedlitigation in bankruptcy court if its request is denied.

ASunEdison spokesman did not immediately respond to a request for comment July 7.

Effortsto move ahead with the lawsuit may reflect the uncertainty still hanging overSunEdison and its creditors, as well as the precarious position Vivint Solar was left in after itsplanned merger with SunEdison fell apart.

Throughmonths of deal negotiations, Vivint Solar's business slowed while costsincreased as the company grew its workforce in anticipation of higher demandafter the merger, executives said.At the same time, the company was limited in its ability to raise money withoutSunEdison's consent. "The uncertainty and the disruptioncaused by the transaction cannot be understated," Greg Butterfield, VivintSolar's former chief executive, said on a conference call in April.

Nowin bankruptcy, it is estimated that SunEdison could raise about $850 millionselling assets, well short of the $4.2 billion in secured and unsecured claimsagainst the company, accordingto Rothschild Inc. Managing Director Homer Parkhill, whose firm is advisingSunEdison.

Inaddition to asset sales, SunEdison is taking steps to try to shore up itsoperations. In a July 8 order, U.S. Bankruptcy Judge StuartBernstein approved a motion allowing SunEdison to continue using its existingcash-management system while giving creditors oversight of the company'sfinances. The arrangement represents a compromise: SunEdison argued the systemis essential to keeping its sprawling network of companies running; creditorssaid the company could not be trusted with unfettered access, given pastallegations of financial wrongdoing.

SunEdisonhas also asked the court to approve incentive plans for teams sellingutility-scale projects, as well those involved in a proposed sale of thecompany's solar materials business. The measures are aimed at raising "much-neededliquidity," SunEdison said.