Fitch Rates Brookfield Asset Management's Notes 'BBB'
NEW YORK -- January 31, 2013
Fitch Ratings has assigned 'BBB' ratings to Brookfield Asset Management,
Inc.'s (BAM) issuance of CAD$175 million 3.95% Medium Term Notes due April 9,
2019 and CAD$175 million 4.54% Medium Term Notes due March 31, 2023. The new
issuances are each a reopening of notes originally issued in April 2012 and
September 2012, respectively. The Rating Outlook is Stable.
Proceeds will be used for general corporate purposes including the redemption
or repurchase of BAM's outstanding 8.95% Notes due in 2014.
BAM is a holding company that through majority-owned or controlled operating
subsidiaries owns a diversified business portfolio, principally commercial
real estate and power generation assets, which provide a stable stream of
earnings and cash flows. BAM also derives a stable and recurring revenue
stream from its asset management business.
Key Positive Rating Drivers
--Diversified and stable revenue sources from a global investment portfolio;
--Underlying commercial real estate and power generation assets are
individually cash flow producing enhancing liquidity;
--Enhanced financial flexibility from holding company structure with key
subsidiaries publicly-listed and maintaining direct access to capital.
Key Negative Rating Drivers
--Structural subordination of BAM's cash flows to debt at the project level or
--High degree of leverage at the operating entities;
--Opportunistic value oriented investment strategy can alter the risk profile.
BAM announced the restructuring of its real estate holdings with the majority
of its investments held by a new entity, Brookfield Property Partners (BPP).
Key assets of BPP include a 51% interest in Brookfield Office Properties (BOP)
and a 21% stake in General Growth Properties (GGP). Fitch expects BAM to
gradually monetize its interest in BPP following a similar restructuring of
BAM's power generation assets into a majority owned subsidiary, Brookfield
Renewable Energy Partners.
The holding company structure, with its primary assets held in several
majority-owned publicly listed companies, enhances BAM's financial flexibility
in managing the capital structures of its operating subsidiaries, but also
subordinates its cash flow which will now be primarily derived from dividends
and distributions. BAM also receives management fees based on asset valuations
of its core operating subsidiaries which Fitch considers a stable source of
income as well as performance-based incentive distributions.
As a holding company with a portfolio of investments, rather than an operating
company, Fitch analyzes cash flows that directly accrue to BAM in the form of
dividends, distributions, and asset management fees against parent level debt
currently around CAD$4.5 billion. The resulting Adjusted Parent Only Cash Flow
(APOCF, a non-GAAP or non-International Financial Reporting Standards measure)
produces a debt service coverage measure of approximately 4.5x in Fitch's
What Could Trigger A Rating Action
Positive: No positive rating actions are currently foreseen.
Negative: Future developments that may individually or collectively lead to a
negative rating action include:
--A change in the risk profile of BAM's real estate and power assets which are
generally considered to be of very quality;
--A large debt financed acquisition.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--Corporate Rating Methodology, Aug. 8, 2012;
--Parent and Subsidiary Linkage, Aug. 8, 2012;
--Criteria For Rating U.S. Equity REITs and REOCs, Feb. 27, 2012;
--Investment Manager and Alternative Funds Criteria, Dec. 17, 2012.
Applicable Criteria and Related Research:
Corporate Rating Methodology
Parent and Subsidiary Rating Linkage
Criteria for Rating U.S. Equity REITs and REOCs
Investment Manager and Alternative Funds Criteria
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Glen Grabelsky, +1-212-908-0577
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Steven Marks, +1-212-908-9161
Jason Paraschac, +1-212-908-0746
Brian Bertsch, +1-212-908-0549 (New York)
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