Brookfield Asset Management Inc. (BPO) is in a good position to capitalize on the impending “liquidation sale” the deleveraging process looks set spark. Because of its conservative financing policies, the company has avoided the recent carnage and has multiple sources of liquidity to draw from, Desjardins Securities analyst Michael Goldberg said in a report.
After Brookfield's annual investor day in New York on Tuesday, he said:
Like other observers, BAM views recent developments as part of a deleveraging process underway that is expected to lead to the liquidation of long-term assets that had been funded with too much leverage—and, in particular, with too much short-term financing that now cannot be replaced.
Another focus for Brookfield has become its renewable power business, which has received more than $8-billion in net invested capital and is more valuable that its high-profile commercial property platform. Renewable power has also been the fastest growing source of funds from operations and Brookfield expects it will grow in value going forward, Mr. Goldberg said.
So if the value of this business is not fully recognized by the market and is set to rise, why would the company consider monetizing some of it? Brookfield’s answer is that it would sell or bring in investors if there were other investment opportunities with equal or better prospects elsewhere, the analyst said.
The message from all of this seems to be the following: investors, be prepared. The current turmoil and deleveraging process is about to spawn a liquidation sale of assets that, properly financed, can generate a high absolute return with low volatility over time.