DBRS Confirms Brookfield Investments Corporation’s Preferred Shares Rating Following Change in Reporting Obligations

DBRS Limited (DBRS) today confirms Brookfield Investments Corporation’s (BIC or the Company) Senior Preferred Shares rating at Pfd-2 (low) with a Stable trend. The confirmation follows the announcement that (1) Brookfield Asset Management (BAM or the Guarantor), BIC’s 100% shareholder, will provide a full and unconditional subordinated guarantee on BIC’s outstanding Senior Preferred Shares, and (2) BIC will rely on continuous disclosure exemption and no longer file its financial statements. DBRS understands that the guarantee will apply to all BIC’s Preferred Shares outstanding other than those held by BAM and its affiliates. Claims under the guarantee will be subordinated to all outstanding senior indebtedness of BAM and will effectively rank pari passu with Preferred Shares issued by BAM.

DBRS currently rates BIC’s Senior Preferred Shares at Pfd-2 (low) with a Stable trend (the same level as BAM’s Preferred Shares) and confirms that the announced change will not result in any change of the rating. The rating has been based on the credit strength of BAM (rated A (low), Stable trend), BIC’s relatively stable portfolio of real estate and asset management investments and strong asset and dividend coverage. With BAM’s guarantee, BIC’s Preferred Shares will be more directly and explicitly supported by BAM. DBRS understands that the guarantee could be terminated in the event that continuous disclosure exemption is no longer available and BIC will recommence financial filings with the securities regulatory authority, although BAM’s obligations towards BIC’s Preferred Shares holders will continue after they are paid in full. Notwithstanding the aforementioned specific features, DBRS has reviewed the guarantee language and considered it to be consistent with requirements under “DBRS Criteria: Guarantees and Other Forms of Explicit Support.”

BAM’s additional financial obligations resulting from the guarantee are modest (CAD 42 million of the CAD 150 million outstanding BIC’s Preferred Shares, with the remainder held by BAM itself) and should not result in any material change in BAM’s own financial metrics and ratings.

The proposed change will result in BIC’s discontinuing any public disclosure of its financial performance and investment composition. DBRS understands that BAM and BIC intend to maintain similar asset size, composition and financing sources in the foreseeable future. In view of this and so long as BAM’s guarantee remains valid, DBRS will no longer issue separate rating reports on BAM and will report the rating of BIC’s Preferred Shares as a guaranteed issue in future BAM rating reports.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Holding Companies and Their Subsidiaries and Preferred Share and Hybrid Criteria for Corporate Issuers, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.