Why Brookfield Infrastructure units fell nearly 29% in March

What happened

Units of Brookfield Infrastructure Partners (NYSE: BIP) plunged 28.8% in March, according to data provided by S&P Global Market Intelligence. The main problem facing the company was fears of a global recession.

So what

The COVID-19 outbreak is forcing governments around the world to shut down their economies to slow the spread of the pandemic and its impact on their health systems. This results in fewer vehicles traveling on toll roads and fewer vessels going to ports, which will impact the transportation segment of Brookfield Infrastructure.

However, the company previously estimated that a recession would only affect its cash flow by around 5% thanks to the strength of its contractual profile and the critical nature of its infrastructure.

Image source: Getty Images.

In addition to the economic effect, another issue that plagued Brookfield last month was that it lost the bidding for the data infrastructure company Cincinnati Bell (NYSE: CBB). As the company increased its offer several times, it ended up pulling out. On the one hand, this will affect the growth of the company, as the deal is said to have boosted its results later this year.

However, Cincinnati Bell paid Brookfield and its partners a breakage fee of $ 24.8 million. Add that cash payment to the money Brookfield would have invested in the transaction, and he has even more cash to take advantage of what could prove to be an attractive time to make acquisitions.

Now what

While Brookfield sold last month, it could end up winning. This is because he entered this period with a strong balance sheet and a lot of cash that he could use to close deals if sellers started to feel financially stressed. For this reason, last month’s massive sell-off looks like a great buying opportunity for investors with a little cash and a long-term mindset.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Marilyn Perkins

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