BPO & BPP: S&P Revises Outlook to Negative

Standard and Poor’s has announced:

Standard & Poor’s Ratings Services today revised its outlook on Brookfield Properties Corp. (Brookfield) and its Toronto-based affiliate, BPO Properties Ltd. (BPP), to negative from stable. We continue to analytically view these two related companies as one rated entity. Brookfield retains an 89% equity interest (representing 54% of the voting securities and 100% of the non-voting securities) in BPP.

At the same time, we affirmed our ‘BBB’ long-term corporate credit rating on Brookfield and BPP and our ‘BB+’ preferred stock rating on the companies.

The current environment of weak operating fundamentals, lower office property valuations, and more-restrictive lender underwriting in the U.S. will pose challenges to the company’s efforts to recapitalize its highly leveraged U.S. property fund (debt is due in late 2011). We would lower the rating one notch if the company does not meaningfully improve its liquidity position this year or if fixed-charge coverage measures were to decline from their current level (1.6x). We would consider revising the outlook to stable if Brookfield’s management successfully addresses the longer-term recapitalization needs of its U.S. fund while strengthening overall consolidated fixed-charge coverage measures.

BPO has the following preferred issues outstanding: BPO.PR.F, BPO.PR.H, BPO.PR.I, BPO.PR.J, BPO.PR.K.

BPP has the following preferred issues outstanding: BPP.PR.G, BPP.PR.J & BPP.PR.M. Each of these issues were mentioned on PrefBlog in the post BAM / BPP Floater Credit Inversion.

BPO.PR.F & BPO.PR.H were added to the S&P/TSX Preferred Share Index in the July 2007 rebalancing. BPO.PR.I was added and BPO.PR.J was removed in the July 2008 rebalancing.

All are tracked by HIMIPref™ all have been relegated to the Scraps index on credit concerns.

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