{"id":21292,"date":"2013-03-06T00:24:58","date_gmt":"2013-03-06T04:24:58","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=21292"},"modified":"2013-03-06T00:24:58","modified_gmt":"2013-03-06T04:24:58","slug":"bam-trend-negative-says-dbrs","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=21292","title":{"rendered":"BAM Trend Negative, Says DBRS"},"content":{"rendered":"

DBRS has announced<\/a> that it:<\/p>\n

has today confirmed all ratings of Brookfield Asset Management Inc. (BAM or the Company) but changed the trends to Negative from Stable. The ratings are BAM\u2019s Issuer Rating at A (low), Commercial Paper rating at R-1 (low), Senior Notes and Debentures Rating at A (low) and Preferred Shares and Preferred Securities ratings, both at Pfd-2 (low). The trend change to Negative follows the downgrade of the Issuer Rating of BAM\u2019s subsidiary, Brookfield Office Properties Inc. (BOP), to BBB from BBB (high), reflecting that BAM\u2019s ratings are under pressure because of BOP\u2019s weaker credit quality, as well as the sustained high debt level at BAM\u2019s corporate level.
…<\/b>
DBRS recognizes that BAM\u2019s corporate-level cash flow metrics have improved in 2012 and are close to our previously stated expectations. For the full-year 2012, the Company\u2019s FFO-to-debt was 28% (compared with 23% in 2011 and DBRS\u2019s expectation of 30%) and FFO interest coverage was 4.9x (compared with 4.5x in 2011 and DBRS\u2019s expectation of 5.0x). The shortfalls from our previously stated expectations also reflect the impact of continued difficult hydrology to operating cash flow in its renewable power segment and some delays in its asset disposal plan.<\/p>\n

However, DBRS notes that, as was the case with BOP, the quality of BAM\u2019s portfolio of operating assets has been affected in recent years by its respective debt-financed expansions at operating company levels (particularly in the retail property, renewable power and infrastructure segments). Although such expansions are generally earnings accretive, the increased leverage, weakened coverage metrics and, in some cases, higher business and project risks, have constrained the quality of cash flow from these companies, most of which are assessed to be compatible to rating levels of BBB or weaker.<\/p>\n

DBRS believes that, to sustain its ratings at the A (low) level, BAM will need to improve the overall credit quality of its investments over time through increasing the proportion of investments with strong BBB or better credit quality and more conservative use of leverage at the operating-company level. With weaker quality of cash flow from BOP and increasing leverage (and therefore debt servicing requirements) in its key subsidiaries in recent years, DBRS now believes the cash flow metrics at BAM\u2019s corporate level will need to be raised in order to maintain the necessary cushion for its ratings. Specifically, DBRS expects BAM to further improve its corporate-level FFO-to-debt toward 35% and FFO interest coverage toward 5.5x, and to maintain at these levels on a sustained basis. DBRS will review the progress during the course of 2013.<\/p>\n

DBRS could consider a one-notch downgrade of BAM\u2019s ratings if it becomes evident that the Company will be unable to meet any of the above expectations and to remedy the shortfall within an acceptable timeframe.<\/p><\/blockquote>\n

Previously reported on PrefBlog have been the downgrade of BPO<\/a> and DBRS’ nervousness about BAM<\/a>.<\/p>\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.<\/p>\n

It also seems likely that a BAM downgrade would involve collateral or related damage to the ratings of Brookfield Properties Corp (BPO.PR.F, BPO.PR.H, BPO.PR.J, BPO.PR.K, BPO.PR.L, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T), Brookfield Office Properties (BPP.PR.G, BPP.PR.J, BPP.PR.M), Brookfield Renewable Power Preferred Equity Inc (BRF.PR.A, BRF.PR.C, BRF.PR.E) and Brookfield Investments Corporation (BRN.PR.A).<\/p>\n

Brookfield Asset Management is the proud issuer of:<\/p>\n

FixedResets BAM.PF.A, BAM.PF.B, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X, BAM.PR.Z
\nFloaters BAM.PR.B, BAM.PR.C, BAM.PR.K
\nRatchetRate BAM.PR.E
\nFixedFloater BAM.PR.G
\nOperatingRetractible BAM.PR.J, BAM.PR.O
\nStraight Perpetual BAM.PR.M, BAM.PR.N, BAM.PF.C<\/p>\n","protected":false},"excerpt":{"rendered":"

DBRS has announced that it: has today confirmed all ratings of Brookfield Asset Management Inc. (BAM or the Company) but changed the trends to Negative from Stable. The ratings are BAM\u2019s Issuer Rating at A …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-21292","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21292","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21292"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21292\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21292"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21292"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21292"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}