SunEdison Inc (NYSE:SUNE) just filed for Chapter 11 bankruptcy protection. Here’s what you need to know.
In what is set to be one of the biggest stories of the second quarter, renewable energy giant SunEdison Inc (NYSE:SUNE) just filed for Chapter 11 bankruptcy protection. As recently as July last year, the company traded for more than $30 a share, giving it a multibillion-dollar market capitalization. In fact, it held the title for the largest renewable energy provider in the US. Across the last 8 to 12 months, however, a spectacular collapse has brought an end to the company – at least in its current form.
SunEdison was highly leveraged, and as interest rates have priced, and as capital flow has tightened, the company has struggled to maintain not only payments on its debts, but also the funding of its operational capacity.
In the bankruptcy report, it looks as though SunEdison is going out with around $20 billion in assets and $16 billion debt, meaning its creditors should receive compensation to the full amount – assuming nothing unexpected comes up.
So what does this mean for the wider renewable energy sector? Well, it’s a young sector, and as such, a lot of the companies in the space are funding their operations with highly leveraged capital. Chances are, this is only the first of a number of bankruptcies set for 2016 and beyond.
Of course, this doesn’t spell the end of the renewable energy space. Analysts expect the sector to be worth in excess of $50 billion by the middle of the decade, and there are a number of companies that have avoided the easy money allure off leveraged capital. These are the ones that should win out come 2025. Stick with us for further updates on SunEdison, and some predictions as to which of the remaining companies in the sector look set to pulling market share on the back of this company bowing out.
DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.