Brookfield Office Properties Inc T.BPO.PR.A

BPO Credit Risk

[hansretterath]

BPO preferred shares are trading at yields of over 11% and yields to second call dates of 17-19%.  Obviously these prices reflect their credit risk and the recent downgrade.  Mark Carney is Vice Chair of BN. 

If BPO defaulted on its relatively small $2 billion or so par value prefs, the pain would be felt by a lot of Canadian retail investors/voters.  The press & non-Liberal parties would have a field day with Mark Carney's economic reputation if BPO had a credit event.  I suspect he would be swayed to use parent company equity of other credit support to avoid this scenario. 

This gives me some (false?) comfort.  Anyone else have a view?

[rodbhar]

I'd never thought about the "Carney Effect" before, but I'm sure BN would lend credit as necessary. I don't think it will be.

[SONOFFERGUS]

Hi. I agree with you but the issue for BN is far greater than reputation -- it is BN's continued access to capital across its businesses. Bruce Flatt & co are smart as the come.  They will not jeopardize their $85B machine unless they decide they have to hand their real estate assets (including those owned by BPY, which guarantees the BPO divs) over to lenders. I am comforted by

[Carena]

Hi there, I totally agree with your line of reasoning, except Carney has only recently come in, mainly on the energy transition side.  I think it is Bruce Flatt's reputation on the line and he will put things right.  Having said that, having Carney around is definitely not a negative. From a central bank and political perspective. I would also say, I don't think BPO is a too

[DJ441c]

Hi  Carena thanks or your comments    Plz correct me if I am wrong     when I looked at the last Q  looked like total assets were about $120 B  and   and net  at about  $47b  or so    thanks  for your valuable comments DJ

[Carena]

Hi DJ, I was wrong....I was quoting their debt number which is approximately $80Billion.  Assets are $130Billion.  The numbers are so big, it is pretty crazy. Have a great night, Carena

[DJ441c]

Great  Carena     just wasn't sure if  I recalled it correctly  still if  NAV is any near close to the real value   you would think  they could deal with the debt You too have a great night dj

[alertmeipp]

For them to hurt preferreds, they will have to cut off their BPY LP distribution to BAM, and BN/BAM is charging large amount of fee to manage BPY RE assets. Will be very messy.