TerraForm deals to have "slightly positive" impact to BEP’s corp debtholders

Canada-based credit ratings agency DBRS Ltd believes that Brookfield Renewable Partners LP’s (NYSE:BEP) participation in the pending acquisition of the two TerraForm companies will have a "slightly positive" impact on its corporate debtholders.

Yesterday it was announced that BEP’s indirect parent, Brookfield Asset Management Inc (TSE:BAM.A), has agreed to increase its stake in TerraForm Power Inc (NASDAQ:TERP) to 51% and substitute SunEdison (OTCMKTS:SUNEQ) as its sponsor, and at the same time acquire in full TerraForm Global Inc (NASDAQ:GLBL). The two targets are yieldcos created by SunEdison, which filed for bankruptcy protection in April 2016.

Brookfield Renewable Partners will take part in the transactions by contributing a total of USD 500 million (EUR 474m) in exchange for taking a 15% interest in TerraForm Power and roughly a 30% stake in TerraForm Global. The company intends to finance its portion of the transactions with the proceeds from a recent preferred share issuance, coupled with cash on hand. It does not plan to issue debt for the purpose.

DBRS, which has given BEP a BBB (high) rating with a Stable trend, said in a statement that the company’s involvement will not materially change its current credit profile. It noted that the acquisitions will slightly improve the profile of BEP’s current asset portfolio, given that most of the operating capacity that will be acquired comes with long-term contracts with counterparties that have good credit profiles.

The agency pointed out that the debt currently issued by the two yieldcos and their projects is non-recourse to the company, which is a positive credit factor.

The two transaction are expected to close in the second half of the year.

(USD 1.0 = EUR 0.947)

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