'The Nightmare Before Christmas': Axiom's Johnson Maintains Sell On SunEdison

• Shares of Sunedison Inc SUNE are down 84 percent year-to-date and are trading around their 52-week low of $2.81.
• Axiom’s Gordon L. Johnson II maintained a Sell rating on the company, with a price target of $2.
• SunEdison’s financial position remains weak and the company may need to borrow again in the near future, Johnson stated.

Analyst Gordon Johnson II mentioned that SunEdison’s financial position is in dire straits. The company has only $600 million in cash for general corporate purposes which does not appear to be adequate to sustain the company through 2Q16.

The company’s poor financial position is also evident from its decision to borrow $169 million in one year paper in 3Q15 from Goldman Sachs Group Inc GS to put up collateral for its margin call on a Deutsche Bank AG (USA) DB loan. Johnson believes that SunEdison may need more emergency funds in the near future.

SunEdison also has a potential obligation to buy around 16 percent of Renova for $250 million using its own shares, the Axiom report noted, while adding that this suggests a significant dilution is in the offing.

The company may need to infuse cash to fulfill its aspirations “for ~$6bn in Warehouse funds to “house” its ~3GW in projects being developed,” Johnson wrote. He added that a credit event is possible before 3Q16 in the absence of an incrementally cheap funding.

SunEdison’s core business is under acute stress with the company facing significant limitations in selling large projects into the secondary market in a short period of time.