BROOKFLD PPTY LP UN
Fitch Ratings has assigned a final rating of 'A-' to
Key Rating Drivers
The unsecured debt rating is equalized with Brookfield Finance's long-term IDR, reflecting the guarantee from Brookfield. Brookfield's unsecured debt rating, in turn, is supported by the firm's fully unsecured funding position and expectations for average recovery prospects in a stress scenario.
Brookfield's ratings reflect its strong competitive position as a global alternative investment manager (IM), solid investment track record, significant fee-bearing assets under management (FAUM), strong operating margins, distribution-generating capacity from listed affiliates, low leverage on a balance sheet basis, strong funding flexibility and a solid liquidity profile.
Rating constraints specific to Brookfield include above-average exposure to management fees charged on the basis of net asset value, relatively high leverage and low interest coverage on a fee-related EBITDA (FEBITDA) basis, a large balance sheet, which exposes the capital base to potential valuation declines, and a more complex organizational structure, given the ownership stakes in listed affiliates,
RATING SENSITIVITIES
The unsecured debt rating is equalized with the long-term IDR and would be expected to move in tandem. A meaningful increase in the amount of secured funding in the capital structure could result in the unsecured rating being notched down from the IDR.
Factors that could, individually or collectively, lead to positive rating action/upgrade include a decline in balance sheet and/or cash flow leverage, such that these metrics approach 0.25x and 1.50x, respectively, under Fitch's hybrid leverage analysis, an improvement in interest coverage on a FEBITDA-only basis approaching or above 4.0x, a reduction in balance sheet risk, increased carried interest-generating capacity with demonstrated stability through a variety of market cycles, and enhancement of the liquidity profile.
Factors that could, individually or collectively, lead to negative rating action/downgrade include material changes in leverage and/or interest coverage following the partial spin-off of the asset management business or resulting from a material degradation of balance sheet assets and/or weaker investment performance which adversely impacts the firm's ability to generate FEBITDA or support listed affiliate distributions.
More specifically, increases in balance sheet and/or cash flow leverage, such that these metrics approach 0.40x and 3.0x, respectively, under Fitch's hybrid leverage analysis, could negatively affect ratings. A narrowing of the firm's product set, a key person or reputational event that challenges fundraising and FAUM growth and/or an impairment of the liquidity profile as it relates to operating needs, debt maturities, and co-investment commitments could also yield negative rating momentum.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.
For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
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