Fitch Affirms Brookfield Asset Management's IDR at 'BBB'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings on Brookfield Asset Management (NYSE, TSX, and Euronext: BAM) as follows:

--Issuer Default Rating (IDR) at 'BBB';

--Unsecured line of credit at 'BBB';

--Senior unsecured notes at 'BBB'.

The Rating Outlook is Stable.

The rating affirmation is supported by solid cash flow generation from a large, well-diversified portfolio of investments, a solid liquidity position, a management team with a strong track record, demonstrated access to a wide variety of capital sources, solid debt service coverage ratios, reasonable leverage, and a manageable debt maturity schedule.

Credit concerns include a relatively complex ownership structure of investments, elevated leverage at a number of BAM's larger investments, and a propensity for entering into related-party transactions.

Fitch notes that BAM maintains a global platform of investments and actively acquires and divests investments. Therefore, the composition of its portfolio has shifted over time. BAM's assets under management have grown materially in recent years, as the businesses that the company controls have added scale, and the company has actively sought partners for the bulk of its investments.

Currently, the largest contributors to BAM's operating cash flows include fee income from managing assets on behalf of other investors, a 51% stake in Brookfield Office Properties, a 100% stake in Brookfield Renewable Power (Fitch rated IDR of 'BBB-' with a Stable Outlook), income received from a number of investments in global real estate and infrastructure, and investment income from real estate finance and restructuring operations. The majority of BAM's cash flows are in the form of dividends and distributions from its subsidiaries, which are subordinate to the operating and debt service requirements at those subsidiaries.

Fitch estimates that its current cash flows are at levels that can comfortably service its corporate obligations, which include approximately $2.6 billion of term debt held directly or guaranteed by the company, $200 million of commercial paper and bank borrowings, and $650 million of convertible preferred securities at Dec. 31, 2010. Additionally, BAM has the ability to monetize some investments as necessary to fund obligations. While subsidiary and project level debt balances are substantial, that debt is supported directly by the operating cash flows of those subsidiaries and/or investments.

The company reported that on a consolidated basis, its activities generated approximately $1.5 billion of net operating cash flow for common shareholders in 2010, up from $1.4 billion in 2009.

BAM maintains a good liquidity position and financial flexibility with access to a wide variety of global capital sources. At Dec. 31, 2010, BAM had $57 million in cash on hand and approximately $1.25 billion in unused capacity through committed, unsecured credit facilities. Additionally, BAM maintains a pool of liquid marketable securities that could be monetized in a relatively short period of time.

BAM has demonstrated good access to third party capital at both the corporate and asset levels, including during very challenging fundraising environments.

BAM's corporate debt maturity schedule is reasonable, with $700 million of corporate maturities over the next two years and minimal exposure to variable-rate debt.

While BAM has made progress in simplifying its investment platform and adding liquidity for certain investments through listed securities, the company owns the bulk of its investments in conjunction with other investors. This could make it more challenging to monetize certain investments quickly.

The following factors may have a positive impact on BAM's ratings and/or Rating Outlook:

--Consolidated net debt to net operating cash flow sustaining below 1.5x (leverage was 2.0x at Dec. 31, 2010);

--Reduced investment complexity.

The following factors may have a negative impact on BAM's ratings and/or Rating Outlook:

--Consolidated net debt to net operating cash flow sustaining above 2.5x (leverage was 2.0x at Dec. 31, 2010);

--A significantly reduced liquidity position.

Based in Toronto, Ontario, Brookfield Asset Management is an asset management company that specializes in global investments in commercial and residential real estate, renewable power generation, and infrastructure assets. As of Dec. 31, 2010, the company had approximately $120 billion of assets under management.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Investment Manager and Alternative Funds Criteria', Dec. 23, 2010;

--'Corporate Rating Methodology', Aug. 16, 2010.

Applicable Criteria and Related Research:

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=590125

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

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