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Axiom's Gordon Johnson 'More Cautious' On Sunedison's Ability To Make It Through 2016

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Axiom's Gordon Johnson 'More Cautious' On Sunedison's Ability To Make It Through 2016
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Gordon Johnson has doubts about Sunedison Inc (NYSE: SUNE)'s chances of making through the year.

Speaking Tuesday on PreMarket Prep, Johnson said he's concerned by the company's debt.

"Sunedison amassed a massive amount of debt... The majority of that debt was used to buy projects they intended to drop down into their yieldco," Johnson said, noting that Sunedison took on $10 billion in new debt from 2011-2015. "Essentially what happened is the yieldco story ended, and this was a company left with a lot of debt and a lot of projects which are extremely capital intensive. When the yieldco story fell apart, you didn't have that buyer of first resort."

The stock, which traded as high as $33.45 in July, was trading around $3 on Tuesday morning. The stock was briefly halted on a circuit breaker.

The question now, according to Johnson, is whether Sunedison can sell these projects in the third-party merchant market. It's been trying since the second quarter of 2015, yet so far haven't been able to sell outside its own warehouses and yieldcos.

Related Link: SunEdison's Latest Disclosure Supports Bullish View, Credit Suisse Argues

This is the core of Johnson's worry: "Given the number of deals and the type of deals that they've done...if they're unable to sell those projects, I don't know how much longer the equity can last."

When asked if Sunedison's new financing deal was a good move, Johnson responded, "Absolutely not. I think this deal makes me more cautious on the company’s ability to make it through 2016."

Part of the problem is it doesn't provide enough information to fully analyze the company, so anybody out there with conviction can only go so far. "We would argue those assumptions are not founded in reality, it's founded in your biased views," Johnson said.

Listen to Gordon's full interview in the clip below, catch the full show here, and check out PreMarket Prep live every morning from 8-9:30 a.m. ET.

Latest Ratings for SUNE

DateFirmActionFromTo
Mar 2016Axiom CapitalMaintainsSell
Mar 2016Stifel NicolausTerminatesHold
Mar 2016Avondale PartnersDowngradesMarket OutperformMarket Perform

View More Analyst Ratings for SUNE
View the Latest Analyst Ratings

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