Janney Likes SunEdison Update, but Says Risk Still 'Elevated'

Energy

Published: December 24, 2015 11:35 am

Last Updated: January 13, 2020 3:44 pm

We noted Thursday morning that SunEdison Inc. (NYSE: SUNE) disclosed negotiations related to a new second-lien credit facility for the company. As part of its announcement the company referred to an updated presentation on the company’s business.

The analysts at Janney have reviewed the presentation and concluded that “the update should serve to calm liquidity fears, and allow the share price to continue to work higher.” Shares traded higher by as much as 10% by mid-morning.

SunEdison presented a cash walk beginning with the end of the third quarter of 2015 and running through the end of 2016. Janney noted the earnout payment due to First Wind is now being estimated at $340 million, significantly less than the analyst’s estimate of $500 million. The estimated amount of cash needed to complete the acquisition of Vivint Solar Inc. (NYSE: VSLR) was in line with Janney’s estimate.

SunEdison expects to end fiscal 2016 with $1.1 billion in cash, double Janney’s previous expectation. Adjusted EBITDA of $1.186 billion is also higher than both the analyst’s prior estimate of $675 million and the consensus estimate of $703 million.

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The proposed new credit facility of $650 million gets a mixed review. The renewed tax credits for alternative energy are a plus, but SunEdison also said that the new term facility could include “a significant amount of the company’s outstanding equity,” and Janney thinks that could be a negative depending on the amount.

On that note, Janney concludes:

We expect the shares to continue to work higher, but our opinion is based on continued execution of the “roadmap” the company has laid out in previous communications and in today’s business update. We still consider the risk level as elevated, and recommend the shares only for the speculative portion of portfolios.

SunEdison stock traded up about 8.7% at $5.86 with about 90 minutes remaining in Thursday’s shortened session. The stock’s 52-week range is $2.55 to $33.45.

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