The company vaguely said the money would be used for "investment opportunities, working capital and other general corporate purposes." The shares reacted predictably, retreating to the new issue price. The selling was further exacerbated by the sudden spike in Treasury bond rates.
Meanwhile, the Bermuda-based partnership reported mixed first-quarter results with funds from operations (FFO) totaling $160 million ($0.80 per unit) compared to $108 million ($0.58 per unit) in the first quarter of 2012.
The bad news was the partnership reported a net loss of $28 million for the quarter compared to a profit of $14 million the year before.
Several factors contributed to the loss, the most material of which was breakage costs associated with its Australian Railroad's execution of a long-term financing that capitalized on the historically low interest rate environment.
In a major move, Brookfield announced it is selling its remaining 25% position in Island Timber, a Canadian forestry company, for $170 million.
There was no immediate announcement as to how the proceeds would be used. But combined with the assets from the equity issue, Brookfield now has a substantial war chest available for new acquisitions.
Although the share price was affected by the interest rate spike, this is a security with growth potential. Plus, management has targeted annual distribution increases in the 3% to 7% range and has actually exceeded them so far.
If they are able to attain this goal, the increase in payout will help to cushion Brookfield's share price in a rising rate environment.
At the current price, the shares yield 4.8%, a significant improvement over 4.2% just a few weeks ago. Take advantage of the price pull-back to establish a new position or add to your current one.
Learn more about this financial newsletter at Gordon Pape's The Income Investor.
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