SunEdison Inc (OTCMKTS:SUNEQ)’s yieldco has been saved. It has been confirmed that Brookfield Asset Management, Canada’s largest alternative asset manager, has shown up as TerraForm Power Inc (NASDAQ:TERP)’s emerging key investor. Or, as some are alluding to it, the solar firm’s white knight.
SunEdison Inc Yieldco Saved by Canadian Manager
Ever since SunEdison filed for bankruptcy protection in April, many investors have wondered about the fate of its yieldcos – TerraForm Power and TerraForm Global Inc (NASDAQ:GLBL). Over the past couple of months, there have been reports that the yieldcos would be following the same path as their parent: insolvency.
For the time being, it seems that TerraForm Power has been saved.
Brookfield Asset Management announced that it has acquired a 12.13 percent stake in TerraForm Power. The move would see Brookfield the biggest shareholder in the company, followed by BlueMountain Capital Management and Appaloosa Management.
According to the Canadian asset manager, it bought 11.1 million Class A common shares of TerraForm stock. It also noted that it’s trying to purchase shares owned by SunEdison.
This helped send TerraForm shares 24 percent higher over the past five trading sessions. It pared some of its gains Tuesday as it’s now trading at $10.85 per share. Year-to-date, TerraForm shares are down 14 percent; in the last 12 months, the stock has tumbled 71 percent.
Why is Brookfield investing in the struggling solar firm and its yieldco? The firm says it sees an “attractive investment opportunity” and the acquisition would help sustain operations at the solar firm.
Representatives from Brookfield and SunEdison did not comment on the reports.
Michael Morosi, an analyst at Avondale Partners LLC, told Bloomberg News that the deal is a “white knight” for TerraForm Power.
“They’re in a position to take over operationally from SunEdison,” Morosi said. “It’s about keeping the plants’ cash flowing, which right now is the much bigger concern for TerraForm.”
SunEdison used to be one of the biggest green energy firms in the U.S. until last year. The stock lost 99 percent of its value after taking on too much debt, expanding too quickly and facing numerous legal and financial woes all over the world. With more than $16 billion in liabilities, it had no other choice but to file for Chapter 11 bankruptcy protection. The yieldcos were not affiliated with the bankruptcy.
The Trouble With SunEdison Inc’s Yieldcos
This isn’t the first time that at least one of SunEdison’s yieldcos had been saved from possible destruction.
David Tepper’s hedge fund Appaloosa Management LP bought 3.65 million shares in TerraForm Global in the first quarter of 2016. It also bought one million shares of TerraForm Power in addition to its 8.7 million shares.
Despite this, both yieldcos have been facing obstacles. Last month, the yieldcos received notices of default from bondholders. One of the reasons for the notice was the fact that they were still unable to submit audited financial statements for 2015.
TerraForm Power has yet to file the report. It extended its deadline to file its annual report to May 28. The deadline has since past.
The yieldcos blamed its parent company’s bankruptcy as reason for lacking the necessary info to file an annual report. SunEdison also confirmed this in a form last month:
“The complexity of completing the Form 10-K and the Form 10-Q has increased substantially compared to the prior periods due to the company’s previously disclosed filing of a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code,” the firm wrote in Form 12b-25.
TerraForm Global shares are down 41 percent year-to-date at just over $3.