Restructuring of the Year - SunEdison

Restructuring of the Year - SunEdison

Bonds Corporate & Sovereign Strategy M&A Renewable Brazil Mexico Uruguay Chile

When SunEdison filed for Chapter 11 bankruptcy protection in April 2016, it faced the tall order of restructuring $16.1 billion in liabilities.

While the sale of the Missouri-based renewable energy company’s two yieldcos to Brookfield Renewable partners for $2.49 billion in March provided a lot of cash, it was SunEdison’s sale of its Latin American assets to Actis Capital that won the award for the Restructuring Deal of the Year.

After receiving final shareholder approval for its bankruptcy plan, SunEdison CFO Philip Gund said in court filings that the company will now exit Chapter 11 to “continue business operations to administer and maximize the value of the company’s remaining assets.”

The price of its Latin America asset sales to Actis Capital in March has not been publicly disclosed. But an impressive aspect of the deal involved packaging a heterogeneous mix of solar power projects for a single major buyer. With the exception of a few assets SunEdison continues to own in Latin America, SunEdison convinced Actis Capital to purchase the large majority of its assets in the region.

“By bundling all the projects together for one buying counterparty, we were better able to maximize value by taking advantage of the economies of scale in operations and management and engineering, procurement and construction. The market for selling the projects individually to buyers would have been completely different,” says Jorge Kamine, a lawyer at Skadden, Arps, Slate, Meagher & Flom, who advised SunEdison in the restructuring process.

The portfolio included two separate transactions in Brazil, and one each in Mexico, Uruguay and Chile. The package involved 578 MW of operating projects and 1,000 MW of early stages developments.

In addition, each project carried different specifications, causing myriad challenges that complicated negotiations. Some projects were structured with power purchase agreements, whereas others were still in the early development phase. Many of the projects also had varying mixes of project debt, according to Kamine.

Other issues involved dealing with counterparties in the aftermath of the bankruptcy filing, with some service providers, equipment providers, project lenders and offtakers feeling pressure to address concerns and mitigate potential effects of SunEdison’s distress.

“We faced a significant challenge navigating and balancing the competing needs of these counterparties, the buyer and SunEdison’s creditors while trying to maximize the recovery for SunEdison’s estate,” says Kamine.

Further complicating matters, in some countries, particularly Brazil and Chile, factors including falling renewable power prices placed significant pressure on the pricing in existing electricity supply agreements, leading to additional complexity to packaging the SunEdison projects for sale.

In the end, SunEdison successfully closed the sale of its 1,578MW portfolio to Actis Capital in March, with the sale contributing to the formation of Atlas Renewable Energy, a new solar business development platform for Actis. LF