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Did Sunedison Just Miss A Preferred Dividend Payment? Gordon Johnson Sees Company In Potentially 'Scary' Scenario

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Sunedison Inc (NYSE: SUNE) might be in a "scary" scenario, according to Axiom Capital's Gordon Johnson.

Johnson, who has a Hold rating on shares, issued an intraday note discussing Sunedison's ability to pay its dividend to preferred shareholders. Using publicly available filings, Johnson's analysis shows the company was apparently due to make an announcement concerning the cash dividend payment on its Series A Perpetual Convertible Preferred Stock last Friday.

"[W]ith this announcement lacking, some are assuming SUNE may have cash issues much more pronounced than already feared," the analyst added.

Assuming a coupon payment of 6.75 percent, the value of this payout is assumed to be about $8.3 million.

Related Link: Bank Of America's Stern Sunedison Warning

"While an announcement may be forthcoming, given the record date was yesterday, we believe some may be fearful that SUNE is more cash strapped than meets the eye," Johnson explained. A missed payment of that magnitude could "portend much bigger issues on the cash line than meets the eye."

A missed preferred dividend payment could be an indication of a "company in financial distress," Johnson said, citing past examples of Bethlehem Steel Corp., Adelphia Communications and WorldCom as signs of trouble. MGIC Investment Corp. was the only company in memory that missed a preferred dividend and didn't experience further financial issues.

Sunedison's potential missed payment isn't an outright default, Johnson concluded, but warned that its "cash strapped nature" at the time of the preferred dividend announcement is worth watching.

Sunedison shares are up 14 percent on Tuesday mid-morning.

The company didn't immediately respond to a request for comment.

Latest Ratings for SUNE

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

View More Analyst Ratings for SUNE
View the Latest Analyst Ratings

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