The Lehi, Utah-based solar panel installer, which is 77% owned by Blackstone (BX - Get Report) , said it delivered a letter to SunEdison on Monday night notifying it that it had terminated the deal after SunEdison's failure to consummate the merger when required. It said it intends to seek all legal remedies available to it after such a "willful breach."
By midday Tuesday, SunEdison's shares jumped 8.7% on the news to $2.07 per share, while Vivint's stock dropped 21% to $4.10. Meanwhile, shares of SunEdison affiliate TerraForm Power (TERP - Get Report) , which was going to take some of Vivint's assets, were up 3.6% to $10.59.
Greg Jones and Andy DeVries, analysts at bond research firm CreditSights, wrote in a report that they think SunEdison will be dragged into a large lawsuit over the deal and will continue to be financially stressed, with its parent-level unsecured convertible bonds trading at 11 cents to 21 cents on the dollar. They reiterated their projection that SunEdison will have to raise $631 million through asset sales to affiliates or third parties.
The Vivint deal was expected to make the Maryland Heights, Mo., renewable energy company the largest residential and commercial solar provider in the world.
SunEdison's stock has been hammered since it announced the agreement in July, given worries about the transaction and its debt and cash flow situation. In December it announced it had renegotiated the deal, including less cash and more stock, with Blackstone agreeing to take stock instead of cash and provide SunEdison with a $250 million credit facility.
On Feb. 25, Vivint shareholders approved the deal, agreeing to receive $7.89 per share in cash plus other securities.
On March 2, The Wall Street Journal reported that Goldman Sachs (GS - Get Report) , Barclays (BCS) , Citigroup (C - Get Report) and UBS (UBS - Get Report) had balked at providing loans they had committed to fund the takeover, citing sources. The report also noting that banks and debt investors were shying away from riskier deals.
SunEdison had other issues. On Feb. 29, it said it was postponing its 2015 financial results while its board investigated claims from former and current employees challenging the accuracy of its financial disclosures. At that time, it hadn't found any wrongdoing, but it warned that the investigation could require it to "reassess its liquidity position." On March 2, it suspended payment on its quarterly dividends on some of its preferred stock.
SunEdison had planned to "drop down," or sell, Vivint's roof-top solar asset portfolio to TerraForm for $799 million, which was revised from the original $922 million.
But TerraForm hedge fund investor Appaloosa Management fought the deal, arguing that it skewed the company from developed renewable energy assets with long-term purchase agreements toward riskier residential rooftop assets and questioned the fairness of the process, noting "troubling" circumstances surrounding one of the conflicts committee's advisers.
The Delaware Chancery Court rejected Appalossa's request for a preliminary injunction of the deal last month, but Chancellor Andre Bouchard said questions remained about the fairness of the TerraForm purchase. Appaloosa, which owns 9.5% of TerraForm's stock, said it would seek an expedited trial in Delaware.
SunEdison has also been pressured by activist investors, with David Einhorn's Greenlight Capital winning a seat on its board in January after it revealed that it had discussions with management about strategic direction. Greenlight owns 6.8% of SunEdison's shares.
In December, SunEdison terminated an agreement to acquire 16% of Renova Energia Sao Paulo for $250 million, saying unnamed conditions as part of that deal hadn't been met. That month it also sold two wind farms to TerraNova Renewable Partners, its partnership with institutional investors advised by JP Morgan Asset Management, for $209 million, which boosted its liquidity, and bought a 33% interest in a 336-megawatt portfolio of solar power plants from Dominion Resources (D - Get Report) for $180 million, which it simultaneously sold to TerraNova.
-- Scott Stuart contributed to this report.