Wednesday, November 18, 2015

"SunEdison Rebounds: Deutsche Defends; Axiom, Bronte Remain Concerned" (SUNE)

From Barron's Tech Trader Daily, who should have been on this but who left the heavy lifting to Income Investing:
Shares of solar installation firm SunEdison (SUNE) are rebounding today from yesterday’s 33% plunge, the result of a disappointing Q3 report, stock sales by prominent hedge funds, worries about the company’s debt position, and worrying signs on Monday from Vivint Solar (VSLR), the residential installation firm that SunEdison is acquiring for $2.2 billion. 
The shares are currently up 12 cents, or almost 4%, at $3.14. 
But is it safe to get back in? There’s some debate today.  
On the positive side, Deutsche Banks’s Visual Shah, who yesterday expressed concerns about the company’s debt position, today writes that he’s reassured after a meeting he organized between management and investors.  
Shah writes he “walked away with answers to several common investor questions” and that “We continue to believe liquidity concerns are overdone and the execution on pending transactions along with refinancing of margin loan could act as positive catalyst for shares.”Top among those concerns was the company’s reclassification of some debt. As Shah describes the company’s explanation, 
For the $410m margin loan, SUNE had to post cash collateral in Q3 due to the sharp decline in TERP shares. Because of this cash trigger the company had to reclassify the loan from non-recourse to recourse. The interest payment on $337m exchangeable notes was always SUNE’s obligation and the classification as non-recourse in prior quarter was due to clerical error. The language around the terms and conditions of the loan has not changed during the past 2 quarters. 
Another question he had was why SunEdison borrowed money from Goldman Sachs at 10% last quarter. The company told him...MORE