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SunEdison Inc (OTCMKTS:SUNEQ) Hits The OTC

SunEdison Inc (OTCMKTS:SUNEQ) Hits The OTC
Written by
Alex Carlson
Published on
April 24, 2016
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InsidrFinancial

The wreckage of SunEdison Inc (OTCMKTS:SUNEQ) is far and wide. Shares have been on a downward spiral ever since July. To make a long story short, inept management, a complicit board of directors, and a crushing debt load lead SunEdison to declaring bankruptcy last week. We'll leave it to the folks over at Seeking Alpha to write the "I told you so" articles that recount the last few months. We are more focused on what investors and traders should do now that shares are trading on the OTC markets since we are penny stock investors.Sun spent billions on acquiring third party assets in the last few years, and then turned around and put those assets into subsidiary yieldcos. Those yieldcos, subsidiary companies holding assets from SunEdison and paying large dividends in general, were intended to help boost the multiples of SunEdison shares. Instead, they ended up being a weight around the neck of the parent company by forming a costly and complex legal structure and making it more difficult for the firm to monetize assets as it ran into legal problems.Subsidiaries TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL) remain standing and while the stocks in both subsidiaries have been hammered, both firms reassured shareholders that they are not planning to declare bankruptcy. Both firms have existing legal protections that should shield equity investors in the stocks from legal claims by SunEdison creditors. However, it’s obvious that SunEdison’s bankruptcy is going to be a huge weight on both companies for the foreseeable future.The latest is that the U.S. Bankruptcy Court for the Southern District of New York has granted the relief requested by the company in key first day motions related to ordinary course business activities. This includes the continuation of employee wages and benefits, work on ongoing projects, and certain vendor payments. Some of these motions were granted on an interim basis and the Bankruptcy Court has scheduled a final hearing for May 10, 2016. The court also granted interim approval for the company to access up to $300 million in debtor-in-possession financing from a consortium of first and second lien lenders in support of continuing business operations.In the bankruptcy filing, SunEdison listed $16.1 billion of debt. A $3.1 billion buying spree in 2014 and 2015 eventually went sour with the failure of a proposed acquisition of Vivint Solar Inc. Judge Stuart Bernstein has said the company can draw $90 million from the $300 million operating loan. A complete financing package, and the examiner motion, will be considered at the hearing on May 10. The company will also look at any competing loan offers if they are presented in the next few weeks.The company also faces dozens of lawsuits by shareholders and an SEC investigation. The reality is that in this bankruptcy equity holders are most likely going to be wiped out. Once the bankruptcy process takes place though – which will likely take years given the complexity of the case – SunEdison will reemerge as an operating entity. The firm’s debtor-in-possession financing will allow it to continue operating as normal for the time being. Matter of fact, SunEdison is sticking to its growth plans in India to build multiple new solar projects.The reality is that the battle over SunEdison is going to be long and expensive. In the meantime, we don't think existing shareholders should sell at these levels. Many have been in this long, so why get out now? We believe that at current levels, there's enough interest in SunEdison that we think shares can easily trade back towards $1. It has a big enough following that the slightest bit of good news will send shares higher on dip buying and short covering. That is what's currently happening now with Peabody Energy Inc (OTCMKTS:BTUUQ). We will be updating Insider Financial as soon as we know more. Sign up for our free newsletter today and get our next hot stock pick.Disclosure: We have no position in SUNEQ and have not been compensated for this article.

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