SunEdison has issued $500 million of 0.25% convertible senior notes which are due to mature in 2020. Interest for the convertible notes will be paid semi-annually on Jul 15 and Jan 15 each year. Holders of the convertible notes have the option to convert every $1,000 worth of senior notes into 37.2148 shares of the company putting the conversion price at around $26.87 per share.
SunEdison expects to use the net proceeds of approximately $487 million from the $500 million issue, minus the initial purchasers' discount and other related expenses, for strategic acquisitions, repayment of certain project indebtedness for solar projects and fund the development and construction of solar projects. The proceeds are also expected to be used for general corporate purposes and fund certain convertible note hedge transactions.
Nonetheless, the current issuance of the senior notes will increase interest expense. The company’s interest expense for the last reported quarter (first-quarter 2014) was $67.6 million, up from $47.5 million in the year-ago quarter.
The current issue will further leverage SunEdison’s balance sheet. As such, the company had cash, cash equivalents and restricted cash of $526.6 million and Solar Energy systems debt of $3.05 billion as of Mar 31, 2014.
Moreover, SunEdison reported dismal first-quarter results on May 8. Although revenues increased on a year-over-year basis, higher-than-expected operating expenses were responsible for the disappointing bottom-line performance.
SunEdison’s divesture of the semiconductor business and its growing exposure to the solar energy market are encouraging. Nonetheless, project development requires considerable time and investments and any delay or inability to sell these projects at desired prices could affect liquidity.
Moreover, increase in debt level and competition from SunPower Corp. (SPWR - Analyst Report) and First Solar Inc. (FSLR - Analyst Report) remain the headwinds.
Currently, SunEdison has a Zacks Rank #4 (Sell). Micron Technology (MU - Analyst Report) with a Zacks Rank #1 (Strong Buy) is a better-ranked stock and therefore, worth considering.