Wilmington, Del. TerraForm Global Inc on Monday sued controlling shareholder SunEdison Inc for misappropriating $231 million of TerraForm Global's cash, days after hedge fund billionaire David Tepper made similar accusations against the struggling renewable energy company.
TerraForm Global said SunEdison, which is being investigated by federal officials, misappropriated the cash by claiming it would be used to finish nearly completed renewable energy projects in India.
In return, TerraForm Global would receive SunEdison's equity interests in the deals, according to a lawsuit filed in a Delaware court.
"SunEdison instead diverted the funds to prop up its flagging liquidity position rather than to fund the projects in India as promised," said the lawsuit.
SunEdison spokesman Ben Harborne said the company declined to comment.
The lawsuit centers on the governance of TerraForm Global, one of two "yieldcos" established by SunEdison. The yieldcos are publicly traded companies formed to hold SunEdison's cash-generating clean energy assets. They are backed by long-term power purchase contracts with utilities, allowing them to pay regular dividends.
Shares of SunEdison, which owns and operates solar power and wind energy plants, plummeted 48 percent to 22 cents on the New York Stock Exchange on Monday, and have plunged about 98 percent over the past 12 months.
TerraForm Global fell 6 percent to $2.20 on Nasdaq after trading at a 52-week high of $14.40 last July.
The TerraForm Global lawsuit came after it warned last week that SunEdison might not transfer the India projects and might not complete other deals. TerraForm Global also warned that SunEdison might soon seek bankruptcy protection.
On March 31, SunEdison said it received a subpoena from the U.S. Justice Department seeking details related to its failed deal to buy Vivint Solar Inc and transactions with both TerraForm units.
SunEdison said it had also received an "informal inquiry" from the U.S. Securities and Exchange Commission "covering similar areas." SunEdison faces a cash crunch and a $12 billion debt piles.
Monday's lawsuit is the latest legal headache for SunEdison. In recent months, Silicon Valley venture capitalists and others have said they were owed money by SunEdison, underscoring the breadth of a breakneck expansion that contributed to its financial woes.
TerraForm Global's lawsuit named three members of its own board of directors as defendants: Ahmad Chatila, Martin Truong, and Brian Wuebbels. They are also senior executives of SunEdison and participated in the plan to misappropriate Terraform's assets, according to the lawsuit, filed in the Court of Chancery in Delaware.
The complaint detailed accusations of behind-the-scenes boardroom maneuvers in November as SunEdison raced to find $100 million to avoid defaulting on a margin loan, secured by the company's stock in TerraForm Power.
If SunEdison defaulted on the loan, it would have caused a cross-default on $8 billion in SunEdison debt, according to the lawsuit.
On November 18, the independent board members of TerraForm Global refused a proposed deals with SunEdison, partly because SunEdison declined to reduce its control over the yieldco.
In response, SunEdison reconstituted TerraForm Global's board, replaced independent directors and terminated its management, according to the lawsuit.
In an amended lawsuit filed last month, Tepper's Appaloosa Management LP claimed SunEdison and various directors of TerraForm Power Inc, the other yieldco, dismantled TerraForm Power's corporate governance and Conflicts Committee.
Appaloosa said in the lawsuit that the defendants then set up a "sham committee," and took advantage of TerraForm and stockholders "at will."
Days later, Appaloosa disclosed it boosted its stake in TerraForm Power to 10.88 percent from 9.50 percent. TerraForm Power was off 8 percent to $9.04.
(Editing by Chizu Nomiyama and Jeffrey Benkoe)
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Updated Date: Apr 05, 2016 00:00 AM