Solar energy company SunEdison Inc (NYSE:SUNE) is preparing to file for bankruptcy as early as Sunday evening, a person with direct knowledge of the matter said on Friday.
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A spokesman for SunEdison declined to comment.
SunEdison, which had debt of about $12 billion as of Sept. 30, said in a filing on Friday that it was in talks for potential debtor-in-possession financing with some of its first and second-lien lenders.
The company said it needed about $310 million to stay in business, estimating a cash shortfall of $260 million by mid-June. SunEdison said it expected to secure the financing by pledging assets.
In the filing, the company said challenges to its business started developing in the middle of last year, when it pursued acquiring Vivint Solar Inc <VSLR.N> and it worked on an initial public offering for TerraForm Global <GLBL.O>, a so-called "yieldco" company it created to hold renewable energy assets.
TerraForm Global and SunEdison's other yieldco, TerraForm Power <TERP.O>, hired financial and legal advisors to help them prepare and develop contingency plans in case SunEdison files for bankruptcy, a spokesman for the yieldcos said on Friday.
The companies rely on SunEdison to make interest payments for them and for back office functions. They have no employees of their own.
Typically, companies enter into debtor-in-possession financing after they file for bankruptcy protection to maintain liquidity while they reorganize.
Analysts said that while the decision to seek debtor-in-possession financing did not necessarily mean the company would file for bankruptcy, it was likely that this would happen soon.
"It is definitely a sign that they are thinking about it because they are trying to get the arrangement in place before they file," said Ian Feng, an analyst at credit research firm Covenant Review.
In the filing, SunEdison laid out three scenarios to continue operating. Two included bankruptcy expenses of more than $70 million.
The company said it entered into confidentiality agreements with lenders on March 17. (http://bit.ly/1SGdzfX)
Debtwire first reported in March that SunEdison was in talks with holders of its second lien loans to fund a DIP facility. (http://bit.ly/1SGjams)
(Reporting by Arathy S Nair in Bengaluru and Jessica DiNapoli; Editing by Saumyadeb Chakrabarty and Ted Kerr)