BAM: S&P Revises Outlook to Negative

S&P has announced:

  • We are revising our outlook on Brookfield Asset Management Inc. to negative from stable.
  • At the same time, we are affirming our ratings on the company, including our ‘A-‘ long-term corporate credit and ‘A-2’ short-term ratings.
  • We base the outlook revision on our view that Brookfield’s corporate adjusted debt and remitted operating cash flows (OCF) in 2012 will result in credit measures that would be either below or very tight to our target levels for the rating.
  • Our base case projection for Brookfield’s 2012 OCF is high single-digit growth, driven by steady performance in its core sectors and modest growth in the opportunities sectors.
  • We believe that the debt levels will increase in 2012 by about 3% from September 2011 levels.

The negative outlook reflects our view that the key credit measures, operating cash flows (OCF) to debt and OCF coverage of debt service, will be under pressure for the rating and that there is little capacity at the current rating for further cash flow deterioration or higher adjusted debt, which would include preference shares at 50%. We could lower the rating if remitted OCF interest coverage and debt coverage remain below 5x and 30%, respectively, in the next 12 months or if we believe Brookfield is becoming more aggressive with its use of project-level or subsidiary leverage, such as increases in its use of recourse debt, guarantees to its subsidiaries, or other measures that would materially commit the parent resources. It is unlikely that we would raise the rating in the near term.

BAM has a plethora of preferred share issues outstanding: BAM.PR.B (Floater), BAM.PR.E (RatchetRate), BAM.PR.G (FixedFloater), BAM.PR.H, BAM.PR.I & BAM.PR.J (OperatingRetractible), BAM.PR.K (Floater), BAM.PR.M & BAM.PR.N (PerpetualDiscount), BAM.PR.O (OperatingRetractible), BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X & BAM.PR.Z (FixedReset).

2 Responses to “BAM: S&P Revises Outlook to Negative”

  1. […] This follows a similar, but more emphatic judgement by S&P. […]

  2. […] pretty near the water in terms of maintaining an investment-grade rating on its preferreds. The negative outlook from S&P is still in […]

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