BNA.PR.A, BNA.PR.B, BNA.PR.C Downgraded by DBRS

DBRS has announced:

has downgraded the rating of BAM Split Corp. (the Company) to Pfd-2 (low) from Pfd-2, with a Stable trend, with respect to the 6.25% Class A Preferred Shares; the 4.95% Class AA Preferred Shares, Series 1; and the 4.35% Class AA Preferred Shares, Series 3 (collectively, the Preference Shares).

The entire portfolio (the Portfolio) owned by the Company is composed solely of Class A Limited Voting Shares of Brookfield Asset Management Inc. The downgrade reflects DBRS’s revisions to its rating approach for single name split share issuers. Pursuant to DBRS’s publication of January 31, 2007 (Split Share Issuers: A Performance Overview), the rating assigned for a preferred share issued by a single name split share company will generally be limited to the rating applicable to the corporate preferred shares related to those shares in the supporting Portfolio, unless there are structural or other features built into the split share issuer which serve to further enhance its credit quality. Brookfield Asset Management Inc.’s Preferred Shares are currently rated Pfd-2 (low) with a Stable trend by DBRS.

Notwithstanding the rating adjustment, the Portfolio has continued to perform well, having appreciated 11% since January 31, 2007. The current downside protection of over 77% provides significant capital protection to the holders of the Preference Shares. The Portfolio generates a sufficient yield (after expenses) to provide 1.21 coverage times over the distribution of dividends to the Preference Shares. If necessary, the Company may write covered calls or sell a portion of the Portfolio to fund the dividend on the Preference Shares.

So in other words, the rating is limited by the rating on the underlying securities, in the absence of mitigating factors. The publication they are referring is on their site.

The announcement does not appear to be related to BAM’s asset spin-off … but you never know!

BNA.PR.C is a recent new issue. The company changed its name last year, when the ticker symbol of the underlying shares changed from BNN to BAM.

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