NEW YORK (Reuters) - A U.S. judge denied a request by shareholders of SunEdison Inc (SUNEQ.PK) for an official committee to represent them in the bankruptcy of the U.S. renewable power plant developer, which the judge described as “hopelessly insolvent.”
In a setback for equity holders hoping to recover some of their investment, U.S. Bankruptcy Judge Stuart Bernstein said in his 21-page ruling filed on Friday that the committee was “not necessary at this time.” But he added that shareholders, who often receive no or very limited recoveries in a bankruptcy, could renew their efforts if circumstances changed.
SunEdison filed for bankruptcy protection in April after its aggressive plan to grow through acquisitions failed. Since seeking court protection from its creditors, the company has sold off some of its assets.
The judge said that equity committees should be the rare exception. Official committees are provided a budget by the bankrupt company to hire lawyers and advisors to carry out investigations.
The shareholders, many of whom had bought SunEdison shares before they fell precipitously ahead of its bankruptcy, had argued that they did not have reliable information about the company’s financials.
Lawyers for the shareholders could not immediately be reached for comment.
Bernstein said that the shareholders’ interests will be represented because the creditors’ committee also looks to maximize value.
“Everyone hopes that these cases will prove to be solvent and return money to the shareholders, but ... this is substantially unlikely,” Bernstein said in his decision.
The company has yet to file its plan of reorganization with the court, and on Thursday received an extension of the time period in which it alone, as opposed to other groups in the bankruptcy, can propose the plan.
Reporting by Jessica DiNapoli; Editing by Jeffrey Hodgson