On Sunday, TerraForm Power and TerraForm Global both announced that they have begun settlement discussions with SunEdison over more than $3 billion in claims that the two companies have against their sponsor for failing to prioritize the needs of stockholders, interfering with its business and failure to provide timely audited financials.
“TerraForm Power has lost a large part of its enterprise value as a result of SunEdison’s catastrophic breach of its sponsorship and legal duties”, said TerraForm Power Chair of the Corporate Governance and Conflicts Committee Jack Stark. Stark serves in the same role at TerraForm Global, which has filed a nearly identical statement.
TerraForm Power estimates that it has over $1 billion in claims against SunEdison, Global over $2 billion.
Despite the depth of problems here, the two companies are hoping for a resolution outside of court. “We also recognize that resolving our relationship with SunEdison in the courts would be complicated and expensive,” continues Stark. “A settlement is overwhelmingly in the interests of both sides.”
In the filings, stark alludes to the “collaborative exploration of strategic alternatives for TerraForm Power (and Global)”. It is no secret that both yieldcos are looking for a buyer, however as was the case with SunEdison it may be that investors are more interested in carving off parts of the two yieldcos than inheriting the troubles of the whole company.
TerraForm Power and Global’s lawyers may have a challenge to get compensation out of SunEdison, which is now run by restructuring officer John S. Dubel. Dubel has proven adept at not paying claims, and in August SunEdison backed out of a decision to pay interest on TerraForm Power notes under his leadership.
TerraForm Power and Global have plenty of problems. The two yieldcos have nearly been de-listed from the NASDAQ over failure to file timely financial reports, and on September 19 both received a stay of de-listing until their cases can be heard on November 3.