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

Fitch Ratings has affirmed Brookfield Asset Management Inc.'s (BAM) Issuer Default Rating, senior unsecured debt rating, and unsecured line of credit rating at 'BBB'. The Rating Outlook is Stable.

The rating affirmation reflects the stable cash flow generation and enhanced liquidity from BAM's majority-owned investments, including Brookfield Office Properties (BPO) and Brookfield Renewable Energy Partners (BREP), as well as cash flows from investments in other large, minority-owned publicly traded entities including General Growth Properties (GGP) and Brookfield Infrastructure Partners (BIP). The recent combination of Brookfield's renewable power assets into BREP substantially improves BAM's liquidity profile and establishes greater visibility for its power generation investments.

Key Positive Rating Drivers

--Diversified and stable revenue sources from a global investment portfolio;

--Underlying real estate, power, and infrastructure assets are cash-flow generating;

--Enhanced financial flexibility and liquidity from stock exchange listings for majority-owned and minority-owned investment.

Key Negative Rating Drivers

--High degree of leverage at operating entities. BAM's key real estate and power assets are nearly entirely encumbered at the project level;

--Structural subordination of cash flows;

--Opportunistic value-oriented investment and acquisition strategy can alter company and risk profile.

Rating Approach

BAM has a somewhat unique corporate profile and structure and Fitch analyzes BAM as a holding company with a portfolio of assets and investments rather than as an operating company. Financially, this represents a deconsolidated approach with respect to BAM's cash flows and debt levels. To a large degree, these cash flows are subordinate to project and asset level debt, but based on the diversity and high-quality nature of such assets, Fitch considers these cash flows to be stable and recurring.

Consequently, Fitch analyzes cash flows that directly accrue to BAM either in the form of dividends and distributions from less than wholly-owned subsidiaries or from earnings flows from wholly owned businesses such as asset management. Fitch measures such cash flows against BAM parent-level unsecured debt, which totaled $4.4 billion at year-end 2011.

Key contributors to BAM's cash flows include annualized dividends and distributions from BPO, BREP, BIP, and GGP, as well as other investment distributions and earnings from BAM's asset management business which Fitch estimates will total $1.1 billion in 2012. Fitch estimates debt service on a year-end deconsolidated debt level of $4.4 billion (senior unsecured long-term and short-term debt level of $3.7 billion and $656 million of capital securities) to be $242 million, resulting in debt service coverage of 4.5 times (x). Fitch's debt service coverage measure is not a GAAP measure nor calculated under International Financial Reporting Standards (IFRS). BAM's financials have been presented under IFRS since 2010.

Financial Flexibility

BAM has maintained substantial financial flexibility with moderate parent-only leverage, as well as a long track record of successful investments. In recent years, BAM has been generating stable cash flows from its diversified investment and asset portfolio. Fitch views favorably BAM's recent corporate restructuring of its power business to create Brookfield Renewable Energy Partners. Following a recent secondary offering that raised $340 million, BAM retains a 68% interest in BREP.

Opportunistic Investor

Given BAM's business model and investment history, ratings reflect the expectation that leverage, liquidity, and asset mix could change over time. Such actions could increase leverage and/or increase the risk profile which could be reflected in a negative rating action.

Liquidity

Fitch views BAM's balance sheet liquidity as strong, reflecting the underlying market access provided from its holdings in BPO, BREP, BIP, and GGP. BAM faces some large corporate level financings this year as well as a significant level of debt maturities and refinancings at BPO. Fitch does not currently expect BAM to provide capital to address upcoming BPO secured debt maturities, which could otherwise result in higher leverage at BAM or reduced fixed charge coverage going forward.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

Corporate Rating Methodology, Aug. 12, 2011;

Parent and Subsidiary Rating Linkage, Aug. 12, 2011;

Investment Manager and Alternative Funds Criteria, Dec. 23, 2011.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=661367

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