NEW YORK (TheStreet) -- SunEdison (SUNE) stock is higher by 0.10% to $5.10 in morning trading on Thursday, as analysts reflect on the solar energy company's announcements yesterday about ways in which it will reduce debt.
Shares of SunEdison have tumbled by 83% during the second half of this year as investors have become increasingly concerned about the company's complicated corporate structure and its ability to finance its plans to add wind turbines and solar panels on six continents, Bloomberg reports.
The company has funded its operations primarily through debt, Bloomberg adds.
To improve its balance sheet, SunEdison on Wednesday noted that it has purchased a 33% stake in a 336 megawatt DC portfolio of solar power plants from Dominion (D). SunEdison then immediately sold the projects to a joint venture of SunEdison and JPMorgan.
Additionally, SunEdison agreed to trade $336 million of exchangeable notes for equity in certain projects and shares of TerraForm Power (TERP), one of SunEdison's yieldcos. The notes were due in 2020.
"This is hugely negative news for SunEdison," Gordon Johnson, an analyst with Axiom Capital Management, told Bloomberg. "They didn't buy anything because they have no cash. Why are they giving away assets to 2020 debt holders? What will the other $11 billion in debt require? This is a sign of a company on the brink of bankruptcy."
Insight from TheStreet's Research Team:
SunEdison creditors are about to be compensated with shares of TerraForm Power, according to a recent filing.
The transaction comes at an interesting time: Many analysts and investors have questioned SunEdison's financial and operational management, as the company's stock has fallen 73% this year. Activist investor David Tepper, of Appaloosa Management -- who took a 9.25% stake in the yieldco in early December -- raised concerns about SunEdison's influence over TerraForm Power earlier this month.
"The vultures are circling," Gordon Johnson of Axiom Capital Management said of SunEdison's creditors, in an interview with Real Money on Wednesday morning. "[SunEdison] is essentially giving away their assets to 2020 debt holders."
In a note sent later on Wednesday morning, Johnson said the transaction makes it appear that SunEdison is becoming "desperate for cash."
- Carleton English, 'SunEdison Creditors to Get Shares of TerraForm Power' originally published 12/30/2015 on RealMoney.com.
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Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate SUNEDISON INC as a Sell with a ratings score of D. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: SUNE