U.S. solar energy company SunEdison Inc SUNE.N, whose aggressive acquisition strategy has saddled it with almost $12 billion of debt, is at "substantial risk" of bankruptcy, one of its two publicly listed units warned on Tuesday.
A bankruptcy would rank among the largest involving a non-financial company in the past 10 years, according to bankruptcydata.com. SunEdison declined to comment.
SunEdison's shares - already reeling from a Wall Street Journal report on Monday that the company was being investigated for overstating its cash position - fell as much as 60 percent to a record low of 50 cents.
TerraForm Global Inc (GLBL.O), one of two SunEdison "yieldcos", said in a regulatory filing that it would join its parent and fellow yieldco TerraForm Power Inc (TERP.O) in delaying its annual report for the year ended Dec. 31. (1.usa.gov/22X8xDu)
However, the company said it did not rely substantially on SunEdison for funding or liquidity and that it would have sufficient liquidity to support its operations even if its parent sought bankruptcy protection.
TerraForm Global's annual report was due by March 30.
Yieldcos are publicly traded subsidiaries that hold renewable energy assets, including assets bought from their parents. They are backed by long-term power purchase contracts with utilities, allowing them to pay regular dividends.
TerraForm Global, whose shares fell as much as 23 percent to a record low of $1.92, said SunEdison may not transfer to it some solar energy projects in India, for which TerraForm Global has paid $231 million, and also may not complete other deals.
"If SunEdison does not perform under these agreements, it could have a material adverse effect on TerraForm Global," TerraForm Global said.
TerraForm Global's chief executive, Brian Wuebbels, is also SunEdison's chief financial officer.
Although solar project developers such as SunEdison continue to benefit from robust demand for solar energy, their shares along with those of other solar companies have been hit by investor concerns - largely dismissed by analysts - that demand could fall due to weak oil prices.
SunEdison, which is run out of Belmont, California, has problems of its own, however.
The company, which has delayed filing its annual report twice, said this month it had identified material weaknesses in its financial reporting controls.
According to a loan agreement filed with regulators, SunEdison could breach a covenant if it does not file its annual report within 90 days after the end of each fiscal year - in this case, March 30.
"The delivery of annual financials is required under their first lien credit facility as well as their second lien term loan," said Ian Feng, an analyst at credit research firm Covenant Review.
The company has at least $1.4 billion in first-lien and second-lien debt, according to filings.
SunEdison is also being investigated by the U.S. Securities and Exchange Commission to see if it had exaggerated its liquidity position, the Journal reported on Monday.
Vivint Solar Inc (VSLR.N) scrapped a deal to be bought by SunEdison this month, citing concerns about SunEdison's finances.
SunEdison had debt of $11.67 billion as of Sept. 30. Excluding its yieldcos, the company had $7.9 billion of debt, and cash and cash equivalents of $1.3 billion.
"At this point, SunEdison has really kinda run out of options," S&P Global Intelligence analyst Angelo Zino told Reuters.
Raymond James analyst Pavel Molchanov said TerraForm Power and TerraForm Global were legally separate companies and would not follow SunEdison into bankruptcy.
"However, there is a close historical relationship between the parent company and these yieldcos and therefore some dislocation in the event of parent bankruptcy should be expected," he said in an email.
TerraForm Power's shares fell as much as 14 percent before recovering to be down 0.6 percent at $8.41 in afternoon trading. SunEdison's shares were down 54 percent at 57.5 cents while TerraForm Global's were down 20.4 percent at $1.99.
TerraForm Global said it was in talks with lenders of its revolving credit facility to obtain an extension on a covenant that requires it to file its annual report on time.
TerraForm Global said the credit facility was not critical to the continuation of its business.
The company had about $1 billion in cash and $500 million available under its revolving credit facility, according to a presentation posted on SunEdison's website on Nov. 10.
Up to Monday's close, SunEdison's shares had dropped about 95 percent in the past 12 months, valuing the company at about $400 million.
TerraForm Power and TerraForm Global did not respond to requests for comment.
(Reporting by Arathy S Nair, Amrutha Gayathri and Swetha Gopinath; Editing by Shounak Dasgupta and Ted Kerr)