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Stocks B / Brookfield Asset Management


Subject:  Re: Some BAM stuff updated Date:  3/3/2009  8:37 AM
Author:  BenGrahamMan Number:  381 of 546

Updated Thesis.This is a real rough draft for starters. This thesis has evolved slightly since November 2008.

(1. ) I think they are over leveraged and that increased credit costs, costs of capital, lower loan to values, could continue to stress BAM.

(2.) BAM has quite a few Joint Ventures or minority interests. On projects they have co-investors. Both Co-Investor and BAM commit capital. I would watch if JV's start failing to meet capital contribution requirements.

(3.) Incestual sales and potentially unusual uses of related parties. These include related party sales. Related party fundings, which include potential below market loans. Related party dividends, which are not necessarily in the best interest of the entity distributing dividends. Potential use of subsidiaries as a funding source, which might not be considered arms-length in nature. Recent items of such could be:

A. BHS rights offering $250M, will be used to pay off BAM loan. Speculation is that BAM will backstop nearly entire offering.

B. Norbord - In the CC they discussed that the $240M CDN rights offering was essentially fully paid for (at least most of it) by BAM. They took that money and paid back BAM. I forget the amount, but I think in the $90M range (I could be wrong.) They amended their credit line with BAM and brought it down to $50M from $100M. They stated that nothing is currently owed on the line.