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SEC Filings

10-K
TERRAFORM GLOBAL, INC. filed this Form 10-K on 12/21/2016
Entire Document
 

automatic stay, which arises upon the commencement of a bankruptcy case, prohibits us from terminating a contract with any of the debtor entities (which includes SunEdison). Similarly, the U.S. Bankruptcy Code invalidates certain clauses that permit a party to terminate an executory contract (a contract where both parties have performance remaining) based on the counterparty’s financial condition, insolvency or commencement of bankruptcy proceedings. Legal proceedings to obtain relief from the automatic stay, to terminate agreements or to enforce rights under agreements can be time consuming, costly and uncertain as to outcome. SunEdison may require bankruptcy court approval in order to continue performing under certain agreements. Agreements with entities that are debtors may not be enforceable until SunEdison seeks (and receives) bankruptcy court approval to assume (accept) those contracts. SunEdison has discretion on whether to seek to assume, assume and assign (in certain cases) or reject executory contracts and we do not control this decision. Approval of the bankruptcy court is required for such assumption, assumption and assignment or rejection and parties in interest have the right to object to such assumption, assumption and assignment or rejection. Although assumption, assumption and assignment or rejection generally must be of the entire agreement, SunEdison could alternatively seek to renegotiate such contracts with us. SunEdison has agreed and could agree in the future to provisions in its debtor-in-possession ("DIP") financing that limit its ability to perform under agreements with us and that give the DIP lenders significant power over such performance.
Our ability to recover for breach, failure to perform or rejection of contracts (particularly for prepetition claims) is likely to be limited, and may be eliminated, depending on the recoveries generally for SunEdison’s creditors, due to competing claims with higher priority and the limited financial resources of SunEdison.
    In addition to those agreements, pursuant to the Interest Payment Agreement, SunEdison has an obligation to pay to the Company an aggregate amount equal to all of the scheduled interest on the Senior Notes up to $81.2 million in 2016, and up to an aggregate amount of $40.0 million in 2017, $30.0 million in 2018, $20.0 million in 2019 and $10.0 million in 2020, plus any interest due on any payment not remitted when due. In 2016, SunEdison failed to pay the amount of $37.1 million as obligated under the Interest Payment Agreement.
On July 29, 2016, the Company received a notice from SunEdison purporting to terminate the Interest Payment Agreement. The notice alleges that SunEdison's bankruptcy permits termination as of right without following the bankruptcy procedures for rejection of executory contracts. Although we do not expect SunEdison to perform under the Interest Payment Agreement going forward, the Company is contesting the purported termination of the Interest Payment Agreement, believes that the termination notice is invalid, and is asserting a claim in the SunEdison Bankruptcy for the full amount of damages resulting from SunEdison’s breach of the Interest Payment Agreement.
On September 25, 2016, the Company filed its initial proof of claim in the SunEdison Bankruptcy case, which was amended on October 7, 2016. This proof of claim asserted claims based on, among other things, SunEdison's breach of the sponsorship arrangement between the Company and SunEdison which included the Amended Interest Payment Agreement and other corporate and project level agreements. We expect that SunEdison and other stakeholders of SunEdison will contest the validity and amount of these claims. Moreover, our ability to recover for breach, failure to perform or rejection of contracts (particularly for prepetition claims) is likely to be limited, and may be eliminated, depending on the recoveries generally for SunEdison’s unsecured creditors, due to competing claims with higher priority and the limited financial resources of SunEdison.
These adverse effects of the SunEdison Bankruptcy on our rights under our agreements with SunEdison could have a material adverse effect on our business, results of operations and financial condition.
There is a risk that our assets and liabilities could be consolidated with those of SunEdison in the SunEdison Bankruptcy.

We believe that we have observed formalities and operating procedures to maintain our separate existence from
SunEdison, that our assets and liabilities can be readily identified as distinct from those of SunEdison and that we do not rely
substantially on SunEdison for funding or liquidity and will have sufficient liquidity to support our ongoing operations. Our
contingency planning with respect to the SunEdison Bankruptcy has included and will include, among other things, establishing stand-alone information technology, accounting and other critical systems and infrastructure, establishing separate human resources systems and employee retention efforts, retaining replacement operation and maintenance and asset management services for our power plants from other providers and the pursuit of strategic alternatives.

However, there is a risk that an interested party in the SunEdison Bankruptcy could request that the assets and
liabilities of the Company be substantively consolidated with SunEdison and that the Company and/or its assets and liabilities
be included in the SunEdison Bankruptcy. Substantive consolidation is an equitable remedy in bankruptcy that results in the
pooling of assets and liabilities of the debtor and one or more of its affiliates solely for purposes of the bankruptcy case,
including for purposes of distributions to creditors and voting on and treatment under a reorganization plan. While it has not
been requested to date and we believe there is no basis for substantive consolidation in our circumstances, we cannot provide


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