SunEdison financial woes also menace yieldcos that keep assets

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Source:   —  April 13, 2016, at 7:54 AM

A judge could regulation that the yieldcos should be included in a SunEdison bankruptcy, analysts said. The companies could also be sold. Either way, a potential SunEdison bankruptcy filing would be unpredictable for the yieldcos because all three companies are so intertwined.

The prospect of a near-term bankruptcy for solar giant SunEdison Inc() also threatens the separate companies it created to keep renewable energy assets - the so-called "yieldcos."

The companies - TerraForm Power Inc () and TerraForm Global Inc () - will likely avert bankruptcy but may not escape unscathed, analysts and restructuring experts said.

A judge could regulation that the yieldcos should be included in a SunEdison bankruptcy, analysts said. The companies could also be sold.

Either way, a potential SunEdison bankruptcy filing would be unpredictable for the yieldcos because all three companies are so intertwined.

The filing could arrive as soon as this week as SunEdison reaches the finish of a grace period set by lenders stemming from its delayed annual report.

TerraForm Global and Power said in a joint statement to Reuters that the companies "don't rely substantially on SunEdison for funding or liquidity" and can support their operations on their own.

A SunEdison spokesman didn't immediately reply to requests for comment.

SunEdison controls TerraForm Power and Global by holding the majority of their voting shares. On their own, both companies have stronger financials than their parent.

TerraForm Power, the larger of the two companies, recorded profit of $2.4 million and debt of $2.5 billion at Sept. thirty, two thousand fifteen, according to its most recent quarterly report. TerraForm Global reported a loss of $82.9 million and $1.2 billion in debt the same date.

The companies are valued for the dividends they pay to investors. Their shares closed Tuesday at $9.52 and $2.58, respectively, compared to SunEdison'south at fortieth cents.

The companies' original relationship with SunEdison gave them call rights - essentially right of first refusal - on projects in the Edison pipeline. But the future of those projects is in jeopardy because of SunEdison'south financial problems, which also threatens the yieldcos future revenues.

A SunEdison bankruptcy could further dampen the yieldcos' prospects.

SunEdison hasn't transferred projects in Uruguay and India to TerraForm Global on time, the yieldco said in public documents. TerraForm Power, focused on domestic markets, may also be at risk of not receiving projects as SunEdison tries to sell off assets in Colorado.

"If the yieldco never receives any extra assets in the future, they're stuck with Ltd income every month, as the Sunday shines and wind blows," said Jeffrey Osborne, an analyst at Cowen & Co who covers SunEdison.

A SunEdison bankruptcy could also cause defaults in the credit agreements at the individual projects for TerraForm Global and Power, but the banks are unlikely to call in the debt as long as the projects are performing, said Swami Venkataraman, an analyst at Moody'south Investors Service Inc.

The yieldcos also rely on SunEdison to create interest payments for them - longstanding arrangements worth tens of millions of dollars each year. Those agreements could be nixed in bankruptcy, according to a public filing, leaving both of them to fend off for themselves.

Both companies, which have number employees of their own, also rely on SunEdison for back office functions. But hiring staff, Venkataraman said, wouldn't thrust either yieldco into bankruptcy.

(Reporting by Jessica DiNapoli; Editing by Brian Thevenot)

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