Bankruptcy Court Action
Motion to Stay and Motion to Compel Mediation
On November 2, 2016, the unsecured creditors’ committee in the SunEdison Bankruptcy filed an adversary complaint against the Company and others with the U.S. Bankruptcy Court for the Southern District of New York. The complaint and contemporaneous motion to stay seek to stay pending litigation against current and former directors and officers of SunEdison and the Company, including TerraForm Global, Inc. v. SunEdison, Inc., et al., the Company’s action against SunEdison described below. The unsecured creditors’ committee intends to file a derivative action on behalf of the SunEdison bankruptcy estate against current and former SunEdison officers and directors. It has requested the stay in order to preserve the proceeds of SunEdison’s and the Company's directors’ and officers’ liability insurance policies. On November 4, 2016, the unsecured creditors’ committee filed a motion in the SunEdison Bankruptcy case for derivative standing to sue various current and former SunEdison officers and directors. The unsecured creditors’ committee filed an amended adversary complaint on November 9, 2016. As described in a motion to compel mediation filed by SunEdison on November 23, 2016, SunEdison and the unsecured creditors’ committee agreed to hold the motion to stay and any proposed claims by the unsecured creditors’ committee against various current and former SunEdison officers and directors in abeyance pending a global mediation relating to insurance issues. The Company’s objection to the motion to stay and the motion to compel mediation was filed on December 1, 2016. On December 28, 2016, pursuant to a consent order entered by the bankruptcy court, SunEdison, the unsecured creditors’ committee and the Company, among other parties, were directed to participate in the mediation process that is being conducted in connection with the SunEdison Bankruptcy. The mediation commenced on February 10, 2017. On March 27, 2017, SunEdison, the unsecured creditors’ committee and the directors and officers of SunEdison who would be defendants in the estate claims proposed to be brought by the unsecured creditors’ committee reached an agreement in principle to settle those claims in exchange for a payment of $32.0 million from a $150.0 million directors’ and officers’ liability insurance policy shared with the Company, TerraForm Power, Inc., SunEdison and certain of their respective directors and officers covering the period from July 15, 2015 to July 14, 2016. The agreement is subject to the approval of the bankruptcy court overseeing the SunEdison Bankruptcy. On March 31, 2017, the limited stay expired. Given the preliminary nature of the claims, the Company is unable to provide any assurances as to the ultimate outcome of these motions or that an adverse resolution of legal proceedings would not have a material adverse effect on the Company’s consolidated financial position and results of operations.
On November 7, 2016, the unsecured creditors’ committee in the SunEdison Bankruptcy filed a motion with the bankruptcy court seeking standing to assert against the Company, on behalf of SunEdison, avoidance claims arising from intercompany transactions between the Company and SunEdison. The Company’s objection to the standing motion was filed on November 29, 2016. The unsecured creditors’ committee filed a reply and supplemental reply in support of its standing motion on December 5, 2016 and December 21, 2016, respectively. On March 6, 2017, the Company entered into a settlement agreement with SunEdison in connection with the SunEdison Bankruptcy and the Merger Agreement (the “Settlement Agreement”), pursuant to which SunEdison would release any potential avoidance claims it may have against the Company. The Settlement Agreement was approved by the Bankruptcy Court on June 7, 2017; however, its effectiveness is conditional on the completion of the Brookfield Transaction. If the Settlement Agreement becomes effective, the Company expects this standing motion will be withdrawn. If the Settlement Agreement is terminated or if the standing motion is not withdrawn, the Company expects to vigorously contest this standing motion and, if standing is granted, the underlying avoidance claims. The Company is unable to provide any assurances as to the ultimate outcome of these claims or that an adverse resolution of a legal proceeding, if commenced, would not have a material adverse effect on the Company’s consolidated financial position and results of operations.
On July 14, 2016, Renova Energia, S.A. (“Renova”) filed a request for arbitration against TerraForm Global, Inc., TerraForm Global, LLC, TerraForm Global Brazil Holding B.V. and TERP GLBL Brasil I Participacoes S.A. (collectively, the “TerraForm Global Parties”) in the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (the “Renova Arbitration”). Renova alleges, among other things, that TerraForm Global, Inc. and certain of its subsidiaries listed above: (i) fraudulently induced Renova to enter into the acquisition agreements related to the Salvador and Bahia wind power plants, the omnibus closing agreement with respect to such acquisitions, and the put/call arrangement entered into between SunEdison and Renova in connection with the Renova Transaction based on misleading and false representations about their and SunEdison’s financial condition and prospects; (ii) aided and abetted SunEdison’s fraud; (iii) negligently misrepresented their and SunEdison’s financial conditions and prospects; (iv) committed related violations of federal and state securities laws; (v) breached express warranties under the applicable acquisition agreements; (vi) wrongfully refused to repurchase from Renova seven million shares of TerraForm Global, Inc. Class A common stock pursuant to Renova’s put exercise notice of