Brookfield Finance Inc. — Moody’s rates Brookfield Finance Inc.’s new backed senior unsecured notes Baa1

Rating Action: Moody’s rates Brookfield Finance Inc.’s new backed senior unsecured notes Baa1Global Credit Research – 03 Feb 2022New York, February 03, 2022 — Moody’s Investors Service (« Moody’s ») assigned a Baa1 rating to Brookfield Finance Inc.’s (« BFI ») new backed senior unsecured notes due 2052 (the « 2052 Notes »), which the company is marketing today. The offering is a takedown from a multiple seniority shelf registration statement filed with the Securities Exchange Commission and dated 6 October 2020. In addition, BFI is reopening today its issue of 3.9% notes, which mature in January 2028 (the « 2028 Notes »).BFI is a finance subsidiary of Brookfield Asset Management Inc. (« Brookfield » Baa1 stable). The 2052 Notes will rank equally with any backed unsecured, unsubordinated obligations of BFI, and they will be fully and unconditionally guaranteed as to payment of principal, premium (if any) and interest and certain other amounts by Brookfield. Such guarantee will rank equally with Brookfield’s other unsecured, unsubordinated obligations.Brookfield intends to allocate an amount equal to the net proceeds from the sale of the 2052 notes to the financing and/or refinancing of « Eligible Investments. » Eligible Investments are investments that fall into a number of sustainability, or « Green » categories, including Green Buildings, Renewable Energy Generation, Energy Efficiency and Management, and Sustainable Water and Waste Management. Pending such allocation, the net proceeds from the sale of the 2052 notes will be temporarily used for general corporate purposes. The net proceeds from the sale of the 2028 Notes will be used for general corporate purposes.The following rating assignment was made:Assignment of definitive rating:Issuer: Brookfield Finance Inc.Guarantor: Brookfield Asset Management Inc.– New Guaranteed Senior Unsecured Notes due 2052, assigned Baa1– Guaranteed Senior Unsecured Notes due 2028, assigned Baa1RATINGS RATIONALEThe Baa1 rating assigned to the 2052 Notes reflects both their senior status and the unconditional guarantee of Brookfield. Brookfield’s Baa1 long-term senior unsecured debt rating reflects the strength of its fee-related earnings, the relatively stable distributions on its invested capital, and the potential distributions of carried interest derived from its fee-bearing capital (FBC). The company invests in capital-intensive industries where it has substantial operating expertise, including real estate, renewable power generation, infrastructure, and distressed businesses, through its private investment funds and its listed partnerships.These investments give rise to stable base management fees supported by various sources of long-term contractual income, supplemented by realized (and accruing) incentive income. The structure of its investments – through public partnerships and debt secured at project levels – results in non-recourse parent credit exposures, but the parent’s rated debt is structurally subordinated to the subsidiaries’ obligations.The business is quite acquisitive, and certain base fees from listed partnerships are market based, which may create volatility in the earnings stream. The company also owns a 62% interest in Oaktree, a global investment manager specializing in alternative investments. In July 2021 Brookfield completed the acquisition of all of the limited partnership units of Brookfield Property Partners L.P. for $6.5 billion.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSBrookfield’s rating and/or outlook (and the ratings and outlooks of the entities it supports) could be subject to positive pressure if the following occurs: 1) consistent growth in stable, fee bearing capital, 2) prudent funding of future strategic actions with a balance of debt and equity capital, and 3) Debt/EBITDA below 2.0x on a consistent basis, assuming listed partnership and private funds remain at or below current leverage levels (based upon cash flow generation, inclusive of preferred securities).However, the long-term rating could face negative pressure if the following occurs: 1) Debt/EBITDA approaching 3.0x on a sustained basis, 2) significant deterioration in the performance of core listed holdings resulting in a decline in distributions up to Brookfield, 3) increased leverage at the listed partnerships and private funds, or 4) a material rise in concentration, such that one investment segment (property, renewable power or infrastructure) increases and remains well above 50% of the firm’s total funds from operations on a sustained basis.Brookfield Asset Management Inc. is a global investment management firm headquartered in Toronto, Ontario, Canada. The firm had $650 billion of assets under management, and $341 billon of fee bearing capital, as of 30 September 2021.The last rating action on Brookfield Finance Inc. was on 7 July 2021, when Moody’s assigned a Baa1 rating on Brookfield Finance Inc.’s 2031 backed senior notes.The last rating action on Brookfield Asset Management was on 7 July 2021, when Moody’s assigned an additional provisional backed senior rating to Brookfield’s multi-seniority shelf registration statement.The principal methodology used in these ratings was Asset Managers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186105. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Neal M. Epstein, CFA VP – Senior Credit Officer Funds & Asset Management Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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