Troubled solar power developer SunEdison Inc. has agreed to allow its unsecured creditors to take on the role of bankruptcy investigators, probing for grounds for potential lawsuits against directors, officers and others involved in its troubles.

Announced at a bankruptcy court hearing in New York, the agreement was reached in talks about SunEdison's finance package, which was under attack from junior creditors wary of allowing the company to go even deeper in debt.

SunEdison was carrying $16 billion in debt when it filed for chapter 11 bankruptcy protection in April and under investigation by the Securities and Exchange Commission and the Justice Department.

The bankruptcy followed a precipitous loss of market confidence and value in the company, which grew quickly by way of financial engineering to become one of the world's largest launchpads for alternative power projects.

Questions about its finances arose last year and have yet to be answered. SunEdison said an internal investigation showed no intentional wrongdoing, but the company hasn't yet filed audited financial statements for 2015.

The settlement creates a $10 million war chest for the official committee of unsecured creditors to investigate SunEdison. The point of the probe will be to find whether there is evidence to support lawsuits against the company's leaders and "others," said Arik Preis, lawyer for a group of SunEdison lenders.

The committee investigation will replace a probe SunEdison requested, one that creditors contended was too limited in scope and budget.

In addition, SunEdison's bankruptcy financiers, which are also the company's senior lenders, agreed to free up for junior creditors up to $50 million of insurance coverage available under the company's officers and directors liability insurance coverage.

SunEdison lawyer Jay Goffman said the agreement that will clear the way to bankruptcy financing could be a first step toward a deal on a chapter 11 turnaround plan for the company. Mr. Goffman also said the agreement to let creditors investigate and possibly sue SunEdison's leaders isn't an admission that there are viable legal claims against them.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

May 20, 2016 13:25 ET (17:25 GMT)

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