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 letter emailed 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, through a
spokesman, declined 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 peg.brickley@wsj.com
(END) Dow Jones Newswires
November 18, 2016 12:35 ET (17:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.