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SunEdison Redid Boards in ‘Friday Night Massacre,’ Suit Says

As SunEdison Inc. navigates through bankruptcy, an 11-day period in November continues to haunt the world’s largest renewable-energy company.

Over that period, the company misrepresented its financial health, withheld details about an imminent margin-loan deadline and ousted several independent directors at the two publicly traded yieldcos it founded and controls, as it sought funds to make the looming payment, according to lawsuits filed against SunEdison prior to its bankruptcy.

SunEdison won court approval Tuesday for a $1.3 billion operating loan. That package will also fund a creditor probe into its financial activities, and the findings will shape the outcome of the bankruptcy. Meanwhile, creditors say the company shouldn’t be in charge of managing its own cash, a question scheduled to be addressed at a June 21 hearing.

The reason is SunEdison’s “large, opaque capital structure, with complex intercompany relationships and cash flows, poor accounting, poor controls and allegedly fraudulent conduct at the highest levels,” creditors said in a May filing. A key event came at the culmination of the 11-day period, an incident that one of the suits called the “Friday Night Massacre.”

Conflicts Committees

That was when SunEdison reconstituted the boards of the two yieldcos it had formed to buy its power plants, TerraForm Global Inc. and TerraForm Power Inc., and the new boards then remade their conflicts committees -- independent directors tasked with evaluating transactions with the parent company. SunEdison’s then-Chief Financial Officer Brian Wuebbels, also named in the lawsuits, became chief executive officer of both TerraForm yieldcos.

SunEdison’s actions “led many commentators to draw parallels with the Enron Corp.” bankruptcy, creditors said in the complaint. Enron lost the right to handle its own cash.

“I’ve never seen a situation where a conflicts committee of the board was fired,” said Nell Minow, vice chairman at ValueEdge Advisors LLC, which advises investors on governance issues.

‘False Statements’

SunEdison’s lead bankruptcy lawyer, Jay Goffman, said in court that the creditors’ allegations are “gamesmanship and false statements” to help boost recoveries. He didn’t respond to requests for comment.

SunEdison declined to comment on allegations in the suits -- one brought by TerraForm Global and the...