S&P: BPO Outlook Revised to Negative from Stable

Standard & Poor’s has announced:

  • Brookfield’s fixed-charge coverage remains low, and we do not expect it to improve until a large pending vacancy at World Financial Center is
    back-filled with new tenants and cash flow related to this property stabilizes.

  • We are revising our outlook on Brookfield Properties Corp. and Brookfield Office Properties Canada to negative from stable.
  • Our negative outlook reflects our belief that previously expected improvements to fixed-charge coverage will take longer to occur.

Standard & Poor’s Ratings Services today revised its outlook on Brookfield Office Properties Inc. (Brookfield) and its Toronto-based affiliate, Brookfield Office Properties Canada (BOX), to negative from stable. We continue to analytically view these two related companies as one rated entity. Brookfield retains an indirect ownership interest in BOX of 83.3%.

The outlook is negative. Brookfield’s fixed-charge coverage remains low, and, we believe, is now unlikely to improve for two years. We would likely lower the corporate credit rating one notch if fixed-charge coverage measures deteriorate from their current (1.4x) levels. Our credit perspective could also change if BAM’s strategic evolution materially alters the operating platform or legal structure of Brookfield. We don’t see much potential for upgrade despite Brookfield’s “strong” business risk profile, unless the company meaningfully deleverages its balance sheet to strengthen its currently “significant” financial risk profile.

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

Additionally, BPO Properties is a subsidiary of the company and has the following preferreds outstanding: BPP.PR.G, BPP.PR.J and BPP.PR.M, but these are not rated by S&P. DBRS rates BPP preferreds a notch lower than BPO preferreds.

The most relevant recent mention of BPO on PrefBlog was just over a year ago, when S&P changed the trend from Negative to Stable.

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