DBRS Rates Brookfield Asset Management’s New Medium-Term Notes at A (low), Stable Trend

DBRS has today assigned a rating of A (low) to the $425 million Unsecured Medium-Term Notes (MTN) maturing March 31, 2023, issued today by Brookfield Asset Management Inc. (Brookfield). The trend is Stable.

The MTN will rank pari passu with all of Brookfield’s other senior unsecured debt obligations. The Company intends to use the net proceeds to redeem or repurchase $350 million of its 8.95% MTNs that will mature June 2, 2014 and for general corporate purposes.

The new issue will result in a modest increase in Brookfield’s long-term debt. As expressed in our Rating Report published April 24, 2012, DBRS considers that the current corporate-level financial measures at Brookfield are weak for its ratings and believes that there is currently minimal room for further deterioration without pressuring the ratings. We re-iterate our expectation (as expressed in our Rating Report published on April 24, 2012) that Brookfield will improve its cash flow coverage metrics to their 2010 level by the end of 2012. These levels are: funds from operation (FFO) coverage of debt of 30% and FFO coverage of interests of 5.0x. We understand that Brookfield intends to achieve a lower debt level mainly through reducing its outstanding commercial paper issuance and drawdown in credit facilities.

If one of the following scenarios were to materialize, DBRS will review and base our rating decision on an assessment of the contributing causes, the Company’s remedial plan and other relevant circumstances. These scenarios are: (1) material increase in the proportion of BAM’s invested capital in less-stable opportunistic investments and private equity, leading to debt increases; (2) material deterioration or rating downgrade in one or more of the core businesses in renewable power, property investments and infrastructure; (3) inability to improve cash flow coverage metrics (which could include FFO-to-debt and FFO fixed charge coverage) to their 2010 levels by the end of 2012.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is DBRS Criteria: Rating Parent/Holding Companies and Their Subsidiaries, which can be found on our website under Methodologies.