All trends are Stable. The rating confirmations reflect the resilience of BAM's fundamental operations at its subsidiaries, listed partnerships, and private funds and their ability to continue to distribute significant cash flow to BAM to service its corporate debt. In addition, the confirmations also incorporate BAM's plan to distribute a 25% interest of its asset management business to its shareholders (the Distribution) by the beginning of 2023.
DBRS Morningstar notes that the growth in AUM and FBC supports the quality of the cash flow to BAM through increases in FFO from the Asset Management segment in 2021 and expected in 2022. This segment has no debt and is forecast to account for approximately 36% of BAM's segment FFO in 2023 (35% in 2017). This unleveraged cash flow, together with BAM's well-diversified operations and large size, significantly mitigates the structural subordination issue for BAM's corporate debt. DBRS Morningstar expects the Asset Management segment to continue to grow and to remain BAM's largest cash flow contributor despite the Distribution. DBRS Morningstar also expects that the other major business segments will continue to benefit from sound fundamentals, providing superior business diversification to BAM.
In the long term, DBRS Morningstar expects all major segments to maintain their solid business profiles. First, DBRS Morningstar expects that the Real Estate segment, although facing significant headwinds with respect to high debt leverage at the asset levels, rising interest rates, and potential global economic recession, will continue to recover from the pandemic and benefit from high-quality assets and premier locations with long-term leases, improvement in occupancy and in-place rents, and good-quality tenants. Cash flow from this segment post 2021 will benefit from BAM's incremental 38% ownership of BPY. Second, the
DBRS Morningstar expects BAM to remain resilient in coping with rising interest rates and inflation as well as potential global economic weakness in the medium term. With respect to rising interest rates, BAM's corporate debt maturity is well spread. Refinancing risk is low over the next few years as there are no corporate debt maturities until
BAM's financial resiliency in coping with potential global economic weakness related to
In light of the challenges presented by rising interest rates, high inflation, and economic uncertainties, DBRS Morningstar believes that BAM's 2022 and 2023 credit metrics (especially in the Real Estate segment) will be somewhat affected. However, despite these challenges, DBRS Morningstar expects (1) BAM's credit metrics will continue to meet DBRS Morningstar's requirements in 2022 and after the Distribution in 2023, supported in part by stronger FFO and incremental cash flow contributions from the Real Estate segment and the strong Asset Management segment as well as significant additional investments in the Private Equity segment; (2) the Company's business risk profiles will not materially deteriorate because of the Distribution; (3) cash distributions to BAM from its subsidiaries and listed partnerships will remain strong, supported by strong fundamentals at the asset levels; and (4) Corporate core liquidity will remain strong. The ratings could be under pressure if the credit quality of BAM's subsidiaries and listed partnerships weakens significantly and/or its corporate credit metrics decline below DBRS Morningstar-expected levels on a sustained basis. A positive rating action is not likely in the medium term, given the current economic conditions and the planned Distribution.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929.
Notes:
All figures are in
The principal methodologies are Rating Entities in the Real Estate Industry (
Support for Nonbank Issuers (
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.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
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 Rating Trend Action Attributesi
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CA = Lead Analyst based in
E =
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13-Jul-22 Issuer Rating A (low) Stb Confirmed CA
13-Jul-22 Senior Notes and Debentures A (low) Stb Confirmed CA
13-Jul-22 Commercial Paper R-1 (low) Stb Confirmed CA
13-Jul-22 Preferred Shares Pfd-2 (low) Stb Confirmed CA
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
E =
U =
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Unsolicited Participating Without Access
Unsolicited Non-participating
13-Jul-22 Senior Unsecured Notes A (low) Stb Confirmed CA
13-Jul-22 Perpetual Subordinated Notes BBB Stb Confirmed CA
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
E =
U =
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13-Jul-22 Senior Unsecured Notes (guaranteed byBrookfield Asset Management Inc. ) A (low) Stb Confirmed CA
13-Jul-22 Fixed-Rate Subordinated Notes BBB Stb Confirmed CA
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
E =
U =
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Unsolicited Non-participating
13-Jul-22 Senior Unsecured Notes (guaranteed byBrookfield Asset Management Inc. ) A (low) Stb Confirmed CA
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
E =
U =
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Unsolicited Participating Without Access
Unsolicited Non-participating
13-Jul-22 Senior Preferred Shares Pfd-2 (low) Stb Confirmed CA
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
E =
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
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13-Jul-22 Senior Unsecured Notes A (low) Stb Confirmed CA
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
E =
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
13-Jul-22 U.S. Commercial Paper (guaranteed byBrookfield Asset Management Inc. ) R-1 (low) Stb Confirmed CA
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