PrefBlog

Standard and Poor’s has announced:

• While the company recently repaid debt to bolster its balance sheet before a large lease expiry, we expect fixed-charge coverage measures to remain low and debt-to-EBITDA to remain high for the next two years.
• As a result, we lowered our corporate credit rating on the company to ‘BBB-‘ from ‘BBB’, the senior unsecured issue-level rating to ‘BB+’ from ‘BBB-‘, and the preferred stock rating to ‘BB/P-3’ from ‘BB+/P-3(High)’.
• The stable outlook reflects our view that the pending vacancy in Brookfield Place New York will eventually be re-tenanted, which will support a recovery in portfolio operating cash flow and fixed charge coverage by 2016.

…
“The downgrade reflects our view that the company’s financial profile will remain weak over the next two years due to the pending large vacancy at Brookfield Place New York and uncertainty regarding the company’s commitment to strengthening fixed-charge coverage and debt-to-EBITDA metrics longer term, given the potential for meaningful development pursuits and/or other largely debt-financed growth,” said credit analyst Elizabeth Campbell.
…
We don’t see any potential for upgrade despite Brookfield Office’s “strong” business risk profile, unless the company meaningfully deleverages its balance sheet to strengthen its currently “significant” financial risk profile, such that fixed-charge coverage rises to the high 1x area and debt-to-EBITDA declines below 9.0x.

We don’t expect further downside pressure to the rating over the next two years. However, our credit perspective could change if BAM’s or BPY’s strategic evolution materially alters the operating platform or legal structure of Brookfield Office or fixed-charge coverage falls below 1.3x.

BPO has the following preferred share issues outstanding: BPO.PR.H, BPO.PR.J, BPO.PR.K, BPO.PR.L, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T, BPO.PR.W, BPO.PR.X and BPO.PR.Y.

Of greater concern is the potential for knock-on effects from BPO’s parent, Brookfield Asset Management (BAM), which has the following preferreds outstanding: BAM.PF.A, BAM.PF.B, BAM.PF.C, BAM.PF.D, BAM.PR.B, BAM.PR.C, BAM.PR.E, BAM.PR.G, BAM.PR.J, BAM.PR.K, BAM.PR.M, BAM.PR.N, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X and BAM.PR.Z.

This entry was posted on Tuesday, July 9th, 2013 at 10:39 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.