Print Page  |  Close Window

SEC Filings

10-Q
TERRAFORM GLOBAL, INC. filed this Form 10-Q on 08/09/2017
Entire Document
 

During the SunEdison Bankruptcy, SunEdison has not performed substantially as obligated under its agreements with the Company, including under sponsorship arrangements consisting of the various corporate level agreements put in place at the time of the Company’s IPO (collectively, the “Sponsorship Arrangement”) and certain operation and maintenance ("O&M") and asset management arrangements. SunEdison’s failure to perform substantially as obligated under its agreements with the Company, including under the Sponsorship Arrangement, project level O&M and asset management agreements and other support agreements may have a material adverse effect on the Company. Despite these adverse effects, the Company operates its business without significant support from SunEdison pursuant to plans for transitioning away from reliance on SunEdison that the Company is in the process of implementing. These plans include, among other things, establishing stand-alone information technology, accounting and other critical systems and infrastructure, directly hiring the Company's employees, and retaining third parties to provide O&M and asset management services for the Company's power plants where the Company does not perform these services itself. In addition to the one-time costs of implementing a stand-alone organization, the Company will be adversely affected to the extent it is unsuccessful in implementing the relevant plans or the resulting ongoing long-term costs are higher than the costs the Company expected to incur with SunEdison as a sponsor.
The project level financing agreements for the Company’s two remaining levered power plants in India and its three power plants in South Africa contain provisions that provide the lenders with the right to accelerate debt maturity due to the SunEdison Bankruptcy because SunEdison is an original sponsor of the project and/or a party to certain material project agreements, such as O&M and engineering, procurement and construction related contracts. In addition, certain audited financial statements at the project level were delayed and may be delayed again in the future. Future delays would create defaults at the project level for the Company's levered power plants. If not cured or waived, these defaults may restrict the ability of the project companies to make distributions to the Company and may provide the lenders with the right to accelerate debt maturity. However, neither the Revolver nor the indenture governing the Senior Notes includes an event of default provision triggered by the SunEdison Bankruptcy, and none of the Company's PPAs includes a provision that would permit the offtake counterparty to terminate the PPA as a result of the SunEdison Bankruptcy.
On September 25, 2016, the Company filed its initial proof of claim in the SunEdison Bankruptcy, and filed an amended proof of claim on October 7, 2016. As set forth in the proofs of claim, the Company believes it has unsecured claims against SunEdison that it estimates are in excess of $2.0 billion. These claims include, without limitation, claims for damages relating to breach of SunEdison's obligations under the Sponsorship Arrangement between the Company and SunEdison and other agreements; contribution and indemnification claims arising from litigation; claims relating to SunEdison’s breach of fiduciary, agency and other duties; and claims for interference with and the disruption of the business of the Company and its subsidiaries, including the loss of business opportunities, loss of business records, failure to provide timely audited financials, and the increased cost of financing and commercial arrangements. Many of these claims are contingent, unliquidated and/or disputed by SunEdison and other parties in interest in the SunEdison Bankruptcy, and the estimated amounts of these claims may change substantially as circumstances develop and damages are determined. In addition, recoveries on unsecured claims in the SunEdison Bankruptcy are expected to be significantly impaired.
In addition, the Company believes that it may have claims entitled to administrative priority against SunEdison, including, without limitation, claims with respect to certain expenses that the Company has incurred after the commencement of the SunEdison Bankruptcy; however, the Company expects SunEdison and other parties in interest in the SunEdison Bankruptcy to dispute both the amount of these claims and whether or not these claims are entitled to administrative priority over other claims against SunEdison.
On November 7, 2016, the unsecured creditors’ committee in the SunEdison Bankruptcy case 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. 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.
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”). The Settlement Agreement was approved by the bankruptcy court overseeing the SunEdison Bankruptcy on June 7, 2017; however, its effectiveness is conditional on the completion of the Brookfield Transaction. The Settlement Agreement contains certain terms to resolve the complex legal relationship between the Company and SunEdison, including, among other things, an allocation of the total consideration paid in connection with the Brookfield Transaction and, with certain exceptions, the full mutual release of all claims between SunEdison and its affiliated debtors and non-debtors, on the one hand, and the Company and its subsidiaries, on the other hand. Under the settlement terms, following the exchange of all of its Class B shares in TerraForm Global, Inc. and the Class B units in Global LLC for Class A Shares, SunEdison will receive consideration equal to 25.0% of the total consideration paid to all of the Company's shareholders, reflecting the settlement of intercompany claims and cancellation of incentive

12