SunEdison (SUNE) Stock: Should You Be Concerned About Declines?


SunEdison Inc (NYSE: SUNE)

SunEdison is having a rough day in the market today after announcing further debt restructuring plans. Today, we’ll talk about the debt restructuring plans, what we’re seeing in the market as a result of the news, and whether or not investors should be concerned about the declines we’re seeing on SUNE today. So, let’s get right to it…

SunEdison Restructures Debt

SunEdison announced early this morning that it has restructured its debt by pricing $725 million worth of second lien secured term loans. The company has also penned an exchange transaction that will ultimately bring their total debt down by $738 million. According to the announcement, the transactions will close on January 11th, providing SUNE with $725 million. This is enough cash to pay off the company’s existing second lien debt as well as interest and transaction costs. The money that is left over after the company pays off debt will be used for general corporate operations. The big kicker here is the amount of interest the company will pay on the debt. The rate SUNE agreed to is Libor plus 10%.

How SUNE Is Reacting To The News

Any time news comes out with regard to a publicly traded company, we can expect to see movement in the market. In this particular case, because of the high interest rate SUNE has agreed to pay, we’re seeing an incredibly bad reaction. Currently (10:18), SUNE is trading at $4.64 after a loss of 15.79% so far today.

Should Investors Be Concerned About The Declines?

It’s easy to see why investors would be concerned – the interest on the new debt is incredibly high.  However, with the sentiment surrounding solar and other renewable energy stocks, I don’t believe that we have much to worry about with regard to SUNE. Throughout the past month, we’ve seen several bits of positive news that are likely to send sales upward. For example, Paris recently reached a major climate change deal and the United States has extended its Federal Tax Credit for consumers and businesses that install solar systems in their homes and offices. As more and more people start to consider the effects that fossil fuels have on the environment, we’re going to start seeing stronger sales from SunEdison as well as others in the industry.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion with regard to what we can expect to see from SUNE. In the short term, the debt restructuring plan is likely to continue to strike fear in the minds and hearts of investors, leading to heavy volatility on the stock. However, in the long term, I believe that SunEdison has incredible potential for upward movement. Through strong acquisitions, SUNE has positioned itself to take a large portion of the market share in the renewable energy space. With recent developments surrounding the idea of climate change, renewable energy companies are likely to see a large increase in sales moving forward. This means that SUNE is going to enjoy higher volume sales that will help them to easily pay off the new, higher interest debt. While the debt is definitely not a good thing, in this particular case, it’s not necessarily worth being concerned about either.

What Do You Think?

Where do you think SUNE is headed and why? Let us know your opinion in the comments below!

[Image Courtesy of Wikipedia]


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