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Fitch Assigns Brookfield Asset Management IDR of 'BBB+'; Outlook Stable.

NEW YORK -- Fitch has assigned the following ratings to Brookfield Asset Management (NYSE and TSX: BAM) (BAM or the company) as follows:

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

--Senior Unsecured Debt 'BBB+'

The Rating Outlook is Stable.

Fitch notes that BAM, an owner and manager of interests in commercial and residential real estate, timber, power generation, and other infrastructure businesses, has a long track record of making successful investments in its chosen areas of focus. BAM's investments have generated strong and increasing levels of free cash flow that have enabled BAM to comfortably service its corporate obligations. BAM has continued to add new investments to its portfolio that are within its areas of expertise.

The primary contributors to BAM's operating cash flows include its 100% stake in Brookfield Power (IDR 'BBB-'), controlling stakes in Brookfield Properties and Brookfield Homes, investment income from its specialty real estate and restructuring groups, fee income from managing assets on behalf of others, and cash received from a pool of other diversified residential and commercial real estate interests.

The company reported that its activities generated $1.77 billion of operating cash flow for common shareholders in 2006. This was an increase of 102% over the $873 million of operating cash flow generated in 2005. While portions of this cash flow consist of one-time gains from monetizations and other special distributions that are a regular part of BAM's investment activities, Fitch is comfortable that BAM has access to at least $900 million of sustainable annual cash flow based on the investments it held at December 31, 2006. Fitch believes that this is ample to service its corporate obligations, which included $2.2 billion of term debt held directly or guaranteed by the company, $689 million of corporate perpetual preferred stock and $663 million of convertible preferred securities at Dec. 31, 2006. Additionally, other BAM investments could be monetized as necessary to fund obligations.

BAM has a strong liquidity position and maintains significant financial flexibility with excellent access to a wide variety of capital sources. At Dec. 31, 2006, BAM had $305 million in cash on hand with ample additional liquidity from $917 million in unused capacity through unsecured credit facilities. Additionally, BAM maintains a sizable pool of marketable securities that could be liquidated in a relatively short period of time.

The company's debt maturity schedule is reasonable, with annual maturities at the corporate level representing below $300 million of outstanding debt, and minimal exposure to variable rate debt.

The geographic and segment diversification of BAM's investments serve to lessen the risk that a significant regional or industry downturn will jeopardize a material portion of BAM's cash flows. The company's assets under management have grown materially in recent years, as the businesses that the company controls have added scale, while its asset management platform has grown significantly. While BAM's existing investments are primarily located in the U.S., Canada, the U.K., and Brazil, the company is actively looking to further expand its geographic reach.

Fitch notes that non-recourse, project level financing is generally utilized on assets within the businesses that the company invests in, minimizing the concern that BAM cash flows would be needed to fund interest payments on any debt associated with poorly performing assets. Accordingly, Fitch's rating concerns include the significant level of subordination inherent in many of BAM's interests, the limitations that come from owning less than 100% of many of its investments, the relatively high leverage at the businesses that contribute a significant portion of BAM's cash flows, and the more limited history of its fund management business. Fitch also notes that BAM actively acquires and divests investments and businesses and the composition of its portfolio has shifted over time.

Based in Toronto, Ontario, Brookfield Asset Management is an asset management company that specializes in global investments in real estate, power, and infrastructure assets. As of Dec. 31, 2006, the company had over $70 billion in assets under management.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Feb 16, 2007
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