SunEdison (SUNE) Price Target Slashed at Oppenheimer; Bullish Stance Maintained
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Oppenheimer analyst, Colin Rusch, slashed his target price on SunEdison (NYSE: SUNE) after the announcement of the exchange transaction. No change to Outperform rating.
SUNE's corporate financing transactions were clearly bitter but a necessary pill to alleviate a short-term liquidity crunch. The exchange transactions look to them like an opportunistic deal, with a net reduction of $513M in convertible notes and preferred stock in exchange for a higher short-term coupon and equity. However, the second lien term loans were in their view clearly borne of short-term liquidity concerns.
In its business update posted January 7th, SUNE attests to $5B in warehouse funding capacity, which they believe should be sufficient for 2016 capital needs. The question now is how quickly SUNE can utilize those warehouses, given that the company needed to take the second lien term loan as a stopgap.
In bringing convertible debt maturities forward into 2018 (from $300M previously to $1.2B now), SUNE has significant pressure to demonstrate cash generation from the devco in 2016-17 in order to refinance at more attractive rates.
No change to the 3.5GW of projects in 2016 but adjusting pro forma margin contribution at the devco level. If you value the devco at 5.5x 2016 EBITDA, at a discount to solar peers, and add SUNE’s stake in the yieldcos the new target price is $7.50, down from $18.
Shares of SunEdison closed at $3.34 yesterday.
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