On Thursday, Brookfield Asset Management Inc. (BAM) declared a public offering of 8 million Class A Preferred Shares, Series 34. The company priced the shares at CDN$25 per share. The sale proceeds, worth CDN$200 million, will be used for general corporate purposes as well as for redemption of the Class A Preference shares, Series 11.

The Preferred Shareholders will receive a cumulative quarterly fixed dividend, yielding 4.20% on an annual basis for the initial period concluding March 31, 2019. Subsequently, the dividend rate will change in every five years at an identical rate to the 5-year Government of Canada bond yield plus 2.63%. The estimated date for the closure of the transaction is September 12, 2012.

In addition, Brookfield has provided an option to the underwriters for purchasing an additional 2 million shares. This option will expire 48 hours before the closing of the transaction. The additional shares will be issued at $25, yielding gross proceeds of $250 million.

In accordance with the Brookfield Asset Management's present short-form base shelf prospectus as of June 7, 2011, which was later modified on June 13, 2012, the company will make the shares available in all districts of Canada. However, the shares may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act.

TD Securities Inc., a unit of The Toronto-Dominion Bank (TD), Canadian Imperial Bank of Commerce (CM), RBC Capital Markets, a subsidiary of Royal Bank of Canada (RY) and Scotia Capital Inc., a division of The Bank Of Nova Scotia (BNS) acted as underwriters of the deal. These financial institutions have committed to purchase the entire offering from Brookfield.

We believe that the issuance of preferred shares will finance future projects for Brookfield as well as improve its financials to a great extent.

Brookfield currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.



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Tickers in this Article: BAM, TD, CM, BNS, RY

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