Shares of SunEdison, Inc. (SUNE) has been trending up post the redemption of its remaining $550 million 7.75% Senior Notes (maturing in 2019), and $200 million of its term loan bearing an interest of 10.75%.
The company also raised its principal amount of $600 million (previously $500 million) with an interest rate of 2.0% convertible senior notes maturing on Oct 1, 2018 and the remaining $600 million aggregate principal amount with an interest rate of 2.75% convertible senior notes, set to mature in Jan 1, 2021.
Through this deal, SunEdison intends to strengthen its balance sheet and also intends to minimize its annual interest expense. Further, this would also result in net savings of approximately $35.0 million per year. Notably, during the last reported quarter, interest expense was $45.2 million, up from $34.6 million compared to the last quarter.
SunEdison broke even in the third quarter of 2013, down 30 cents from the year-ago period. SunEdison ended the third quarter with cash balance of $757.4 million, up from $482.1 million in the previous quarter, primarily due to share issuance coupled with solar project financing and working capital management. Long-term debt was $756.1 million compared with $755.9 million in the previous quarter.
SunEdison issued a cautious guidance for the fourth quarter. Moreover, the company expects a moderate rise in its operating expenses, going forward. Price erosion is also a concern for the company.
Nonetheless, we believe that SunEdison’s recent tie-up with Brazil’s Petrobras to build one of the largest solar photovoltaic power plants is a positive. This venture will help SunEdison to tap the Brazilian solar market and expand geographically.
However, competition from SunPower Corp (SPWR) and First Solar Inc. (FSLR) is a concern.
Currently, SunEdison has a Zacks Rank #3 (Hold). Investors may also consider a better ranked technology stock, SanDisk Corp (SNDK), which carries a Zacks Rank #2 (Buy).
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