All trends are Stable. The confirmations reflect the resilience of BAM's fundamental operations at its listed partnerships and private funds and their ability to continue distributing significant cash flow to BAM to service its corporate debt, despite the ongoing Coronavirus Disease (COVID-19) pandemic. As at
BAM's credit metrics for LTM 2020 remained solidly supportive of the current ratings as follows:
FFO-to-debt remained strong at 45% (approximately 39%, adjusted for debt treatment of preferred shares), above DBRS Morningstar's expectation of at least 35%.
Net cash flow-to-corporate debt was strong at approximately 41% (approximately 36% adjusted for preferred shares), above DBRS Morningstar's expectation of around 30% (25% on an adjusted basis).
Non-consolidated leverage remained in line with DBRS Morningstar's expectation that the corporate debt-to-capital would be in the low 20% range on an adjusted basis.
Cash flow-to-interest coverage was solid at 9.53 times (x), consistent with DBRS Morningstar's expectation of above 5.0x.
DBRS Morningstar expects a significant decline in FFO this year (excluding
The significant growth in FBC supports the quality of the cash flow to BAM through increases in base management fees in the Asset Management segment, which is the largest FFO and cash flow contributor to BAM. This segment has no debt and accounted for approximately 45% of BAM's segment FFO in 2019 (27% in 2015). The unleveraged cash flow and the diversification of BAM's operations significantly mitigate the structural subordination issue for BAM's corporate debt. DBRS Morningstar expects this segment to continue to grow and remain BAM's largest cash flow contribution. Following the acquisition of a 61% interest in Oaktree, which has improved BAM's client base and diversification, DBRS Morningstar estimates that between
In the long term, DBRS Morningstar expects all major segments to maintain their solid business profile. Although the trend on the ratings of
The Stable trends reflect DBRS Morningstar's expectation that (1) BAM's credit metrics will continue to meet our requirements over the medium term, despite the potential impact of the pandemic, supported, in part, by a full year contribution from Oaktree; (2) the Company's business risk profiles will not materially deteriorate because of potential investments or capital recycling from mature assets to higher-return, higher-risk assets; (3) cash distributions to BAM from its subsidiaries will remain strong; and (4) Corporate core liquidity will remain strong to maintain flexibility in its financing plan. The ratings could be under pressure if the credit quality of BAM's listed partnerships weakens significantly and/or its corporate credit metrics decline to below DBRS Morningstar-expected levels on a sustained basis. A positive rating action may be taken if (1) BAM's business risk profile improves significantly and (2) BAM's non-consolidated credit metrics improve materially on a sustained basis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
Notes:
All figures are in
The principal methodologies are Rating Entities in the Real Estate Industry (
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
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 under Related Documents or by contacting us at info@dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrsmorningstar.com.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Issued
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CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
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29-Jun-20 Issuer Rating Confirmed A (low) Stb CA
29-Jun-20 Senior Notes and Debentures Confirmed A (low) Stb CA
29-Jun-20 Commercial Paper Confirmed R-1 (low) Stb CA
29-Jun-20 Preferred Shares Confirmed Pfd-2 (low) Stb CA
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
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29-Jun-20 Senior Unsecured Notes (guaranteed byBrookfield Asset Management Inc. ) Confirmed A (low) Stb CA
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
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29-Jun-20 Senior Unsecured Notes (guaranteed byBrookfield Asset Management Inc. ) Confirmed A (low) Stb CA
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
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29-Jun-20 Senior Preferred Shares Confirmed Pfd-2 (low) Stb CA
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
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29-Jun-20 Senior Unsecured Notes Confirmed A (low) Stb CA
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
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29-Jun-20 U.S. Commercial Paper (guaranteed byBrookfield Asset Management Inc. ) Confirmed R-1 (low) Stb CA
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