Clean energy company SunEdison announced on Friday that it’s paying $28.5 million to settle a lawsuit from the shareholders of former acquisition target Latin America Power. As a result of the news, SunEdison’s shares shot up over 19% in early morning trading.
A year ago, as part of a massive buying binge, SunEdison entered into an agreement to buy Latin America Power for $733 million. Latin America Power owns clean energy projects, like wind and hydro plants, in Chile and Peru.
But last summer, SunEdison’s stock started to plummet, following investors fears that the company had bitten off more than it could chew. The company’s shares slid from about $33 per share last summer to $1.81 as of Friday in morning trading.
Last October, SunEdison (SUNE) revealed that it would not complete the buy out of Latin America Power. SunEdison also reportedly was working on a variety of ways to renegotiate or back away from other deals.
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Last month, the shareholders of Latin America Power initiated a lawsuit to stop SunEdison from shifting assets outside of its ordinary course of business. The judge in the case quickly issued a temporary restraining order. Latin America Power was seeking $150 million through arbitration for the failed deal.
That the shareholders settled for a fifth of what they wanted in arbitration could be yet another indicator of SunEdison’s financial troubles. This week SunEdison revealed that it’s undergoing an internal investigation into former employee allegations about issues with liquidity. As a result of the investigation, SunEdison delayed filings its latest fourth quarter and full year earnings.
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The recently settled lawsuit originally described SunEdison has “teetering on the edge of bankruptcy.” Because SunEdison delayed its financial statements, banks that had agreed to put up loans for SunEdison’s acquisitions are now balking. That puts its biggest deal, to buy solar installer Vivint Solar for $1.9 billion, in jeopardy.
In the settlement, none of the parties admitted to any wrongdoing.
