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TerraForm Power Stock Up on News of Brookfield Stake Buy
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Shares of TerraForm Power Inc. got a boost after investment firm Brookfield Asset Management revealed its purchase of a majority stake in the beleaguered power generation company.
As per a regulatory filing, the Toronto-based activist investment firm has acquired 11.1 million Class A shares of TerraForm Power for $98.5 million, in turn acquiring a stake of 12.1% in the company. With this, Brookfield has now become the largest stakeholder in TerraForm Power, followed by BlueMountain Capital and Appaloosa Management LP in the second and third ranks.
The activist investment firm further revealed that it has entered into swap agreements that expose it to about 25% of the company's total shares. Brookfield was also interested in purchasing Class B shares of the company, which are currently held by SunEdison. Notably, if the investment firm succeeds in acquiring these Class B shares from SunEdison, it will gain substantial control over TerraForm Power.
The news boosted investor’s confidence on the stock as it lead them to believe that if TerraForm Power’s operating portfolios did not have any significant value, Brookfield would not have risked investing in a business, especially when its parent company had filed for Chapter 11 bankruptcy protection. Note that TerraForm Power is a yieldco formed by SunEdison.
Shares of TerraForm Power soared as high as 20% in yesterday’s trading session, marking its highest jump in at least six months, before settling at an approximate 18.2% gain. Another yieldco owned by SunEdison, TerraForm Global , witnessed a sharp rise of over 8% yesterday.
We believe that the investment by Brookfield was just in time. It should be noted that TerraForm Power has recently sought for an extension from its bondholders to avoid any default which could send it into bankruptcy.
The recent development will certainly boost confidence of bondholders, which may even encourage them to provide the much-needed extension.
TerraForm Power has been in troubled waters since its parent company, SunEdison, filed for bankruptcy due to heightened debt burden and deteriorating revenues and net income. TerraForm Power has also been facing these challenges.
These developments should bring in some respite for TerraForm Power. However, we also believe that investors should steer clear of parking their money in stocks that are at such high risks of bankruptcy.
Currently, TerraForm Power carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the Utility-Electric Power industry are Black Hills Corporation (BKH - Free Report) and Korea Electric Power Corp. (KEP - Free Report) , both sporting Zacks Rank #1 (Strong Buy).
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TerraForm Power Stock Up on News of Brookfield Stake Buy
Shares of TerraForm Power Inc. got a boost after investment firm Brookfield Asset Management revealed its purchase of a majority stake in the beleaguered power generation company.
As per a regulatory filing, the Toronto-based activist investment firm has acquired 11.1 million Class A shares of TerraForm Power for $98.5 million, in turn acquiring a stake of 12.1% in the company. With this, Brookfield has now become the largest stakeholder in TerraForm Power, followed by BlueMountain Capital and Appaloosa Management LP in the second and third ranks.
The activist investment firm further revealed that it has entered into swap agreements that expose it to about 25% of the company's total shares. Brookfield was also interested in purchasing Class B shares of the company, which are currently held by SunEdison. Notably, if the investment firm succeeds in acquiring these Class B shares from SunEdison, it will gain substantial control over TerraForm Power.
The news boosted investor’s confidence on the stock as it lead them to believe that if TerraForm Power’s operating portfolios did not have any significant value, Brookfield would not have risked investing in a business, especially when its parent company had filed for Chapter 11 bankruptcy protection. Note that TerraForm Power is a yieldco formed by SunEdison.
Shares of TerraForm Power soared as high as 20% in yesterday’s trading session, marking its highest jump in at least six months, before settling at an approximate 18.2% gain. Another yieldco owned by SunEdison, TerraForm Global , witnessed a sharp rise of over 8% yesterday.
TERRAFORM POWER Price
TERRAFORM POWER Price | TERRAFORM POWER Quote
We believe that the investment by Brookfield was just in time. It should be noted that TerraForm Power has recently sought for an extension from its bondholders to avoid any default which could send it into bankruptcy.
The recent development will certainly boost confidence of bondholders, which may even encourage them to provide the much-needed extension.
TerraForm Power has been in troubled waters since its parent company, SunEdison, filed for bankruptcy due to heightened debt burden and deteriorating revenues and net income. TerraForm Power has also been facing these challenges.
These developments should bring in some respite for TerraForm Power. However, we also believe that investors should steer clear of parking their money in stocks that are at such high risks of bankruptcy.
Currently, TerraForm Power carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the Utility-Electric Power industry are Black Hills Corporation (BKH - Free Report) and Korea Electric Power Corp. (KEP - Free Report) , both sporting Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>