BAM - Brookfield Asset Management

[John Hjorth]

For deals, yes. If BAM maintains its stake. But BIP generates enough to fund organic capex internally, which drives a decent amount of growth.

 

Al & Pete,

 

Yes, for deals [, not for the running operations]. Personally, I'm not worried about BIP in this environment.

[YVRtrader]

Does anyone have thoughts on the Brookfield family Prefs (Canadian)?  I have BPO.PRR and BPO.PRP from higher levels.  Added BAM.PFB today yielding almost 10% and not resetting until March 2024.  My thinking is that it's a little bit safer, but still with plenty of upside potential.

[petec]

Does anyone have thoughts on the Brookfield family Prefs (Canadian)?  I have BPO.PRR and BPO.PRP from higher levels.  Added BAM.PFB today yielding almost 10% and not resetting until March 2024.  My thinking is that it's a little bit safer, but still with plenty of upside potential.

 

I'd feel pretty safe in those!

[petec]

At the risk of injecting some facts into the BPY discussion: of $48bn in proportionate debt, $4bn comes due this year, all at the asset level, and of that $1.6bn is in the retail segment. This is broken out on p15 of the 4q19 supplemental and compares with $6.9bn of liquidity at the BPY level. It's going to be a while before they are a forced seller. It may even be that BPY has the opportunity to buy out cash-strapped minorities at nice prices, although I suspect they'd rather buy their own stock.

 

Interesting comment in the BAM letter yesterday that asset level debt was rolled even in 2008/9. Clearly this time is different - it always is - but my guess is the liquidity crunch is not going to be as bad due to drastic government action (I have never seen a better excuse for a fiscal splurge than coronavirus). What will really matter is how the government acts to support companies, and in particular retailers, on the verge of bankruptcy. If these companies are kept alive by grants, debt service deferrals, and salary subsidies (as is happening in the UK) then they will spring back to life fairly rapidly after the virus (boosted by people being delighted to get out of their homes). If they are not kept alive then even the best retail real estate will be deep in temporary sh1t.

 

 

 

[Xerxes]

I suspect WeWork and SoftBank have far to worry about than BYP and BAM

[petec]

I suspect WeWork and SoftBank have far to worry about than BYP and BAM

 

Yup.

 

Mind you I’m not sure that’s saying much.

[peterHK]

Thing you need to remember about BAM and all the other big PE guys is no bank wants the keys or to destroy the relationship. They will always amend and extend because fundamentally the bank does not want to run a port or a toll road.

 

regarding the LP's, BAM has proven adept at propping them up (see the demand loan stuff at BPY), and if they wanted to, could take down an entire equity issue in the LP's to fund a growth project. I think it's highly unlikely they do this, but they could if they absolutely had to. At a corporate level, BAM has a lot of firepower.

[matts]

Thing you need to remember about BAM and all the other big PE guys is no bank wants the keys or to destroy the relationship. They will always amend and extend because fundamentally the bank does not want to run a port or a toll road.

 

regarding the LP's, BAM has proven adept at propping them up (see the demand loan stuff at BPY), and if they wanted to, could take down an entire equity issue in the LP's to fund a growth project. I think it's highly unlikely they do this, but they could if they absolutely had to. At a corporate level, BAM has a lot of firepower.

 

This. I spoke to someone in RE investment banking at one of the big Canadian banks and they have bank-wide authority to switch commercial RE loans to interest-only without further individual approval. Banks think this is a short-term thing so they will do everything to keep the relationship. They know that in 4 months (they think 2, i think more) BAM will punish those who did not play ball. It will be like this with most RE.

 

That's for existing loans. New liquidity is available only at large premiums to what could have been signed just a month ago. the Plus in "libor + x" has gone up 1.5-2% even for the best borrowers if they need new liquidity right now.

 

 

[petec]

Thing you need to remember about BAM and all the other big PE guys is no bank wants the keys or to destroy the relationship. They will always amend and extend because fundamentally the bank does not want to run a port or a toll road.

 

regarding the LP's, BAM has proven adept at propping them up (see the demand loan stuff at BPY), and if they wanted to, could take down an entire equity issue in the LP's to fund a growth project. I think it's highly unlikely they do this, but they could if they absolutely had to. At a corporate level, BAM has a lot of firepower.

 

Totally agree. Mind you if BAM had to step in in a big way it would impact the BAM price.

 

My concern isn't the banks - it's bondholders. Persuading them to extend and pretend might be more complex.

[petec]

This. I spoke to someone in RE investment banking at one of the big Canadian banks and they have bank-wide authority to switch commercial RE loans to interest-only without further individual approval.

 

That's really interesting. We have not quite reached that stage in the UK but I am involved with a small business that asked for 6 months of interest-only and the bank suggested 12. It's not confirmed yet - they do have to ask permission - but we are hopeful.

 

I would imagine banks globally are thinking similarly and if a small business can get this treatment then a BAM definitely will.

 

But as I say, that's bank loans. Might not be so easy with bonds.

 

 

[Uccmal]

I dont think that BAM is any danger of a cash crunch.  The have been buying millions of shares of BPY the past few days.  And BPY has been buying their own shares.  And Brian Kingston (BAM's BPY overseer) has bought a bucketload of shares. 

 

Doesn't look like they are overly worried about liquidity. 

[petec]

I dont think that BAM is any danger of a cash crunch.  The have been buying millions of shares of BPY the past few days.  And BPY has been buying their own shares.  And Brian Kingston (BAM's BPY overseer) has bought a bucketload of shares. 

 

Doesn't look like they are overly worried about liquidity.

 

Agreed.

 

Where did you see BAM buying BPY?

[gokou3]

I dont think that BAM is any danger of a cash crunch.  The have been buying millions of shares of BPY the past few days.  And BPY has been buying their own shares.  And Brian Kingston (BAM's BPY overseer) has bought a bucketload of shares. 

 

Doesn't look like they are overly worried about liquidity.

 

Agreed.

 

Where did you see BAM buying BPY?

 

 

Almost 4M over the past week:

https://ceo.ca/api/sedi?symbol=bpy

 

 

[Astrea]

I don't see why the thesis changes; the pandemic may well accelerate the demise of the low quality malls benefiting online but also quality malls as retailers consolidate brick and mortar presence there.

[racemize]

The letter says:

 

• Our shares have sold off along with everything else. We have been acquiring, and will continue to acquire

our own shares for value when it makes sense – and in time, we are certain they will recover.

 

Seems like they've mostly been buying BPY, not parent, unless I'm missing it?

[petec]

The letter says:

 

• Our shares have sold off along with everything else. We have been acquiring, and will continue to acquire

our own shares for value when it makes sense – and in time, we are certain they will recover.

 

Seems like they've mostly been buying BPY, not parent, unless I'm missing it?

 

I think you’re right.

[Uccmal]

Bam was buying and cancelling 20-50 k  shares a day more or less for a couple of weeks to March 16.  It either hasn't been updated since March 16 or they stopped.  My source is Ink Insider.  I suppose I could go to that nasty Sedar Site and work it out but I get the gist of it. 

[Xerxes]

I find it also interesting that they mentioned that they have switched their focus to listed equities.

I don’t think we ll see BBU buy blue chip equities like Walk Disney ? Lol. But so not sure where that is going

[racemize]

Bam was buying and cancelling 20-50 k  shares a day more or less for a couple of weeks to March 16.  It either hasn't been updated since March 16 or they stopped.  My source is Ink Insider.  I suppose I could go to that nasty Sedar Site and work it out but I get the gist of it.

 

I'm failing on my google-fu, you have a link?

[EliG]

https://ceo.ca/api/sedi/?symbol=bam

 

[plato1976]

what's the chance BPY needs to cut its dividend ?

 

The letter says:

 

• Our shares have sold off along with everything else. We have been acquiring, and will continue to acquire

our own shares for value when it makes sense – and in time, we are certain they will recover.

 

Seems like they've mostly been buying BPY, not parent, unless I'm missing it?

 

I think you’re right.

[gokou3]

I find it also interesting that they mentioned that they have switched their focus to listed equities.

I don’t think we ll see BBU buy blue chip equities like Walk Disney ? Lol. But so not sure where that is going

They bought some Transalta:

https://ceo.ca/api/sedi?symbol=ta

 

[petec]

I find it also interesting that they mentioned that they have switched their focus to listed equities.

I don’t think we ll see BBU buy blue chip equities like Walk Disney ? Lol. But so not sure where that is going

 

Disney, no. But within the infrastructure wheelhouse (broadly defined) they will be looking for value and distress. As another posted has noted they have increased their stake in TransAlta and I won't be surprised if BIP is active in the MLP space having talked about it since 2016. BBU, who knows what they are looking at, but they play plenty in publicly listed things anyway (Teekay).

 

The point, I think, is that public market prices move faster than private ones so in a panic the opportunities show up first in the public markets and, later, in the private markets. Across the BAM family I expect they are looking for value in public equity and debt markets - and ideally value that might turn into a private/control position later (via a carve-out, bankruptcy, sale by a distressed controller, or whatever).

 

Exciting times. They have been preparing for this for a while and have cash and big funds waiting to go.

[petec]

what's the chance BPY needs to cut its dividend?

 

Reasonably low, although I say that with low conviction. But I also don't care - the value of buildings is not in the short term cash flows.

[Uccmal]

Bam was buying and cancelling 20-50 k  shares a day more or less for a couple of weeks to March 16.  It either hasn't been updated since March 16 or they stopped.  My source is Ink Insider.  I suppose I could go to that nasty Sedar Site and work it out but I get the gist of it.

 

I'm failing on my google-fu, you have a link?

 

 

Hey Joel,

 

Its through my brokerage account.  I dont think there are any workarounds.