DBRS Increasingly Nervous About BAM

DBRS has announced that it:

notes the trend change of Brookfield Office Properties Inc. (BOP) to Negative from Stable on October 18, 2012. DBRS has indicated in the past that rating changes at Brookfield Asset Management Inc.’s (BAM) major subsidiaries could have rating implications for BAM at the corporate level. DBRS is also of the view that BAM’s overall credit profile has weakened within its current rating category in recent years as a result of fluctuating cash flows from its opportunistic investments and increased leverage at the corporate level.

With this, there remains minimal room for further deterioration, as indicated in our most recent report on BAM, published on April 24, 2012. As such, DBRS believes that BAM’s current ratings could come under pressure due to: (1) a material deterioration or rating downgrade in one or more of the core businesses (including BOP); (2) corporate-level financial metrics for 2012 fall short of our targets (funds from operation (FFO)-to-debt of 30% or higher and FFO interest coverage of 5.0 times); or (3) a material increase in the proportion of BAM’s invested capital in less-stable opportunistic investments.

DBRS will continue to monitor BAM’s performance to determine whether one or more of any of these issues brings sufficient pressure to warrant a trend change or other rating action.

The Negative Trend on Brookfield Office Properties was announced on October 18 and reported on PrefBlog.

Brookfield Asset Management is the proud issuer of:

  • Floaters BAM.PR.B, BAM.PR.C, BAM.PR.K
  • RatchetRate BAM.PR.E
  • FixedFloater BAM.PR.G
  • OperatingRetractible BAM.PR.J, BAM.PR.O
  • Straight Perpetual BAM.PR.M, BAM.PR.N

A downgrade of BAM would also have an immediate effect on the SplitShares issued by BAM Split Corp.: BNA.PR.B, BNA.PR.C, BNA.PR.D and BNA.PR.E

DBRS’ increasing discomfort with the rating on BAM has been reported on PrefBlog in several posts: BAM To Slow Balance Sheet Deterioration and DBRS: BAM is Not-Quite-Trend-Negative. S&P assigned Outlook Negative to BAM last spring, and Outlook Negative to BPO in the summer.

One Response to “DBRS Increasingly Nervous About BAM”

  1. […] … and their investment grade credit rating has been the subject of nervous announcements from DBRS and […]

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