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How Wall Street’s Favorite Solar Company Spent Itself to the Brink

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Brian Eckhouse, Bloomberg

Just nine months ago, SunEdison Inc. was Wall Street’s favorite clean-energy company. It sopped up every dollar it could come by to finance a breath-taking buying binge of wind and solar farms, and in the process became the world’s largest renewable-energy company. Now, SunEdison is teetering on the verge of bankruptcy protection, its stock below $1.

The company’s fall is largely its own doing, the almost inevitable result of an ascent that was built on financial engineering and cheap debt. But it had plenty of enablers in the form of bankers, who pocketed fees with each acquisition, and investors, who reaped attractive dividends in a protracted stretch of low interest rates.

Even “smart, thoughtful and skeptical hedge funds” bought SunEdison’s story, said Gordon Johnson, an analyst at Axiom Capital Management Inc. “It’s not just management’s fault, it’s not just their hubris. They just began to drink their own Kool-Aid.”

SunEdision faces potential technical defaults on at least $1.4 billion in loans and credit facilities if it fails Wednesday to either obtain waivers from lenders or file its already-delayed 2015 annual report. The prospect of bankruptcy protection, which has shadowed SunEdison for much of this year, was acknowledged March 29 by a company it controls, TerraForm Global Inc. In a filing, TerraForm said “there is a substantial risk that SunEdison will soon seek bankruptcy protection,” citing its parent’s “liquidity difficulties.”

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