Shares of SunEdison Inc. (NYSE: SUNE) jumped about 8% at one point Wednesday morning after the solar energy company SunEdison reported the extinguishment of $336 million in 3.75% guaranteed exchangeable senior secured notes. Under the terms of the exchange, noteholders will receive a “specified number” of class A shares in TerraForm Power Inc. (NASDAQ: TERP), the yieldco controlled by SunEdison, along with SunEdison’s “membership equity interest” in some clean energy projects currently be developed.
SunEdison also announced Wednesday that it and a partnership it formed last September with institutional investors have acquired a 33% stake in a 336 megawatt portfolio of operating solar power plants from Dominion Resources Inc. (NYSE: D) for $180 million plus an adjustment for working capital. A second purchase of 231 additional megawatts is expected to close early in 2016.
About the only reason for SunEdison to extinguish a debt that is not due is to improve its cash flow. The cost is equity, and what seems to be happening is that SunEdison has chosen to court new investment at the price of keeping existing shareholders happy. After all, $336 million is a pretty small piece of the company’s total debt of around $11 billion as of last September.
In mid-afternoon trading Wednesday, the shares have fallen back to a gain of around 2.4%, trading at $5.13 in a 52-week range of $2.55 to $33.45.
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