DBRS Rates Brookfield Asset Management’s Unsecured Medium-Term Notes at A (low), Negative

DBRS has today assigned an A (low) rating to a $500 million Unsecured Medium-Term Notes (the Notes) issued on January 23, 2014, by Brookfield Asset Management Inc. (Brookfield or the Company). The trend is Negative. They are issued pursuant to the Short Term Base Shelf Prospectus dated June 26, 2013 (as amended by Amendment No. 1 dated November 29, 2013) and Pricing Supplement dated January 23, 2014. The Notes, which will mature on January 28, 2026, are an unsecured obligation and rank equally and rateably with all of Company’s other unsecured and unsubordinated obligations. Proceeds of the Notes will partly be used to repay outstanding short-term borrowing and for general corporate purposes.

In assigning the instrument rating, DBRS reiterates that, as consistent with the Negative trend, BAM will be challenged to improve the overall 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 Brookfield Office Properties Inc. (and indirect subsidiaries) and increasing leverage (and therefore debt servicing requirements) in its key subsidiaries in recent years, DBRS also believes that the cash flow metrics at BAM’s corporate level will need to be raised in order to maintain the necessary cushion for the ratings. Specifically, DBRS expects BAM to further improve its corporate-level funds from operations (FFO)-to-debt toward 35% (or about 30% on an adjusted basis) and FFO interest coverage toward 5.5 times (or about 5.0 times on an adjusted basis), and to maintain these ratios at these levels on a sustained basis. DBRS recognizes that, during the first three quarters of 2013, BAM has made progress toward the aforementioned targets through improved operating performance and reduced debt level. DBRS will review the full-year financial results and expect that the Company will attain and maintain their coverage ratios within our expectation during the course of 2014. Failure to do so could result in a one-notch downgrade of the ratings.

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

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