That beautiful mess known as SunEdison (NYSE: SUNE) may be getting that much closer to bankruptcy after reports surfaced yesterday from Debtwire that the company is in talks with holders of its second-lien loans to fund a debtor-in-possession (DIP) financing facility. Talks focused on providing the company with about $300 million in new liquidity, the report stated.
Today two Wall Street sell-side analysts threw in the towel amid the news.
Stifel suspended its rating on SunEdison entirely and Axiom Capital analyst Gordon Johnson slashed his price target to $0.22, or 85% below yesterday’s close.
Johnson notes that in general DIP financing is put in places after out-of-court resolutions fall apart. He notes this is typically done via Chapter 11 Bankruptcy.
He said if successful “we believe this likely shifts lower the priority of the majority of their capital structure (with equity holders the least likely to be made whole)”. It also suggests, the company’s cash position is “dire, if not completely comprised.”
If the company does go the bankruptcy route, David Einhorn and a number of fellow hedge funders, who own tens of millions of shares, will be put out of their misery.