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SEC Filings

TERRAFORM GLOBAL, INC. filed this Form 10-Q on 11/08/2017
Entire Document

The Company believes that it has observed formalities and operating procedures to maintain its separate existence, that the Company's assets and liabilities can be readily identified as distinct from those of SunEdison and that the Company does not rely substantially on SunEdison for funding or liquidity and will have sufficient liquidity to support the Company's ongoing operations. The Company's 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, directly hiring employees necessary to operate its business and establishing employee retention efforts, retaining third parties to provide O&M and asset management services for the Company's power plants where it does not perform these services itself 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. While it has not been requested to date and the Company believes there is no basis for substantive consolidation in its circumstances, there can be no assurance that substantive consolidation will not be requested in the future or that the bankruptcy court would not consider it. 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. Bankruptcy courts have broad equitable powers, and as a result, outcomes in bankruptcy proceedings are inherently difficult to predict. To the extent the bankruptcy court were to determine that substantive consolidation was appropriate under the Company's facts and circumstances, the assets and liabilities of the Company could be made available to help satisfy the debt or contractual obligations of SunEdison.

On July 28, 2017, the bankruptcy court overseeing the SunEdison Bankruptcy entered an order confirming the SunEdison Plan. If the SunEdison Plan (which includes the completion of the Brookfield Transaction as a condition to its effectiveness) becomes effective, interested parties in the SunEdison Bankruptcy would no longer be able to seek substantive consolidation of the Company with SunEdison.
There have also been covenant defaults under certain of the Company's project level financing arrangements, mainly because of delays in the delivery of project level audited financial statements and the SunEdison Bankruptcy, which resulted in defaults because SunEdison, Inc. and certain of its affiliates have been serving as O&M and asset management service providers or as guarantors under relevant contracts. The Company has been working diligently with its lenders to cure or waive instances of default, including through the completion of project level audits and the retention of replacement service providers. However, there can be no assurance that all remaining defaults will be cured or waived. All of the Company's project level financing arrangements are on a non-recourse basis, and therefore these defaults do not directly affect the financial position of the Company. However, if the remaining defaults are not cured or waived, this would continue to restrict the ability of the relevant project companies to make distributions to the Company, and may entitle certain project level lenders to demand repayment or enforce their security interests or other remedies.
Additionally, covenant defaults may occur in the future under the indenture governing the Senior Notes in the event of delays in the filing of the Company’s periodic reports with the SEC. There can be no assurance that the Company will be able to file its periodic reports with the SEC within the periods currently required under the indenture governing the Senior Notes or that holders of the Senior Notes will agree to any required extension of financial statement filing dates on acceptable terms or at all. A default on the Senior Notes would permit the trustee or the holders of at least 25.0% in aggregate principal amount of notes outstanding to accelerate the Senior Notes. The Company would likely not have sufficient liquidity to meet this obligation, which could have a material adverse effect on its business, results of operations, financial condition and ability to pay dividends.
The risk of substantive consolidation of the Company with SunEdison and inclusion in the SunEdison Bankruptcy, as well as the risk of future covenant defaults under the indenture governing the Senior Notes, raise substantial doubt about the Company’s ability to continue as a going concern.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with SEC regulations for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America ("U.S. GAAP") for complete financial statements. The financial statements should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements for the year ended December 31, 2016, filed with the SEC on Form 10-K on June 15, 2017.