By Peg Brickley
Brookfield Asset Management has hung a possible price tag on its proposed takeover of TerraForm Power Inc., at $13 per share, a penny under Thursday's market closing price.
The overture from Brookfield and its deal ally, the hedge fund Appaloosa Management, spurred a slight uptick in trading in TerraForm Power, a publicly traded "yieldco" that owns renewable energy assets, which gained about 3% in the hours after the Friday announcement with the Securities and Exchange Commission.
Brookfield has been openly pursuing TerraForm Power since June. In a letteremailed Thursday to the independent directors of TerraForm Power, Brookfield urged swift action to stay ahead of bondholders, and, potentially, bankruptcy.
By Dec. 6, bondholders could be in position to push TerraForm Power into bankruptcy, Brookfield wrote. That is due largely to a running event of default on debt related to the company's failure to file audited financial statements.
A lawyer for bondholders couldn't immediately be reached Friday to discuss Brookfield's statements. TerraForm Power didn't immediately respond to a request to comment.
TerraForm Power is open to deal talks thanks largely to the bankruptcy of the company that launched it, solar power developer SunEdison Inc.
Swamped with debt, SunEdison is to blame for TerraForm Power's inability to file audited financial statements for 2015, TerraForm Power contends. SunEdison is selling assets to pay creditors owed billions of dollars, and its stakes in TerraForm Power and TerraForm Global, Inc., a similar company, are believed to be SunEdison's most valuable assets.
The yieldcos aren't in bankruptcy, but could be headed toward it, unless they file the missing audited financial reports.
For months, bondholders have agreed to give TerraForm Power more time to come up with the audited numbers, but each time they have exacted a price. By Dec. 6, Brookfield said, bondholders may have had enough.
One of TerraForm Power's largest shareholders, Brookfield fears "bondholders will not agree to the requested waivers, and therefore, the TerraForm companies face the potential for a default of the bonds which could necessitate bankruptcy protection," the letter said.
Bankruptcy is bad news for shareholders, who usually lose all in chapter 11.
Even if they agree to give the company more time, Brookfield said, bondholders will demand concessions that could crimp TerraForm Power's access to the capital markets, pushing the company into a corner.
Brookfield's letter was also directed to the board of TerraForm Global, a smaller company that was caught up in SunEdison's troubles along with TerraForm Power. Owner of power projects in Brazil, India, China and emerging markets, TerraForm Global's stock has suffered more than TerraForm Power this year. TerraForm Global could be included in a deal, Brookfield said.
Hedge fund D.E. Shaw & Co. has also gone public with its interest in TerraForm Power, and, like Brookfield, has said it is open to various forms of deals.
TerraForm Power owns wind and solar power projects in the U.S., U.K., Canada and Chile.
Lawyers for SunEdison's creditors didn't immediately respond to a request to discuss Brookfield's offer. Thursday, at a court hearing, Matthew Barr, lawyer for the official SunEdison committee of unsecured creditors, said creditors are anxious for answers about what's to become of SunEdison's stakes in the TerraForm companies.
The links between SunEdison and the TerraForm companies are more than just stock ownership. They shared accounting systems, a factor the TerraForm companies say is to blame for their inability to produce audited financial statements.
SunEdison is also the "sponsor" of the TerraForm businesses, a position that means it is the party on certain crucial power plant contracts.
Both Brookfield and D.E. Shaw have discussed stepping into SunEdison's shoes, taking over management of TerraForm Power. At Thursday's hearing in Manhattan bankruptcy court, Mr. Barr, lawyer for SunEdison's creditors, said an acquirer that pushed SunEdison out the door would be expected to pay for the privilege.
In its letter to the company's board, Brookfield said it could buy all TerraForm Power shares for cash, or buy 50% to 60% of the company and take on a long-term sponsorship role.
Write to Peg Brickley at firstname.lastname@example.org
(END) Dow Jones Newswires
November 18, 2016 12:22 ET (17:22 GMT)
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