SunEdison Soars After Finding ‘Overly Optimistic Culture,’ Not Fraud

By | April 14, 2016

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SunEdison ‘s ( SUNE ) retained counsel blamed a former employee for the bungled Vivint Solar ( VSLR ) acquisition but noted SunEd’s own top management forged “an overly optimistic culture” related to projected cash flow. The late 2015 audit wrapped up April 4, finding no material misstatements in SunEd’s historical financial statements and no evidence to support fraud or willful misconduct by management, according to an 8-K filed Thursday. SunEdison shot up 58% to 58.5 cents on the stock market today . SunEdison is still about 98% off their seven-year high above 33 touched on July 20, 2015, achieved after announced plans to acquire solar installer Vivint. Ex-Worker Cited For Wrongdoing Largely, the auditor blamed a former employee for the failed Vivint Solar deal. SunEdison was slated to buy the residential developer for an initial $2.2 billion price tag. Vivint Solar called off the marriage in March, citing SunEd’s financial stance. “The independent directors also identified wrongdoing by a former non-executive employee of the company in connection with negotiations over the termination of the Vivint Solar acquisition,” according to the filing. SunEdison said it fired the employee when it learned of the wrongdoing. The company acknowledged in an 8-K filing last month that the U.S. Securities and Exchange Commission is investigating it, and that the  Department of Justice has subpoenaed  its Vivint records. The auditor also found problems related to SunEdison’s cash forecasting and liquidity management practices. Those practices may have led SunEd to technically default on $725 million in second-lien loans last month unless its creditors allowed for extensions. Specifically, the auditor said SunEdison’s cash forecasting efforts lacked sufficient controls and processes, and certain assumptions underlying cash forecasts were “overly optimistic,” and “a more fulsome discussion of risks and adjustments” was warranted. Also, SunEd failed to respond appropriately when its forecasts flopped. The auditor recommended SunEdison implement an improved cash forecasting system and provide more transparency to the board regarding cash management practices. Hiring Ilan Daskal to succeed Brian Wuebbels as CFO is also a remedy, the audit found. TerraForm Global Sues SunEdison Wuebbels stepped down in March from his SunEd CFO role but will remain in his TerraForm Global ( GLBL ) and TerraForm Power ( TERP ) CEO positions. Last month, TerraForm Global tried to separate itself from its parent , saying “there is a substantial risk that SunEdison will soon seek bankruptcy protection.” Last week, TerraForm Global filed a claim against SunEdison and its top dogs, asserting breach of fiduciary duty and contract, as well as “unjust enrichment” by SunEdison related to its failure to drop $231 million in India projects to its yieldco. TerraForm Global had already prepaid the money and is now seeking relief. In the same claim, it argued sister yieldco TerraForm Power would be liable for the $231 million if SunEdison files a bankruptcy petition. Both TerraForms are also now out of Nasdaq compliance, having twice delayed their annual 10-K financial filings. TerraForm Power has until May 16, and TerraForm Global until May 31, to submit plans for how they will become compliant. Nasdaq can grant a 180-day extension, allowing both yieldcos until September to regain compliance or risk delisting. TerraForm Global stock fell 3% to 2.56 on Thursday. TerraForm Power stock lost 3.1% to 9.71. Scalper1 News

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