Q: I'm trying to understand how safe the preferred shares of Brookfield Office Properties (BPO) are as they are selling at a big discount to par. I understand that obligations of BPO preferred shares are guaranteed by all of the companies within the umbrella of the Brookfield Property Partner L.P. (BPP) group but am not clear whether the obligations of BPP are guaranteed by its parent .
Any information and views you have on this issue would be welcome.
Any information and views you have on this issue would be welcome.
5i Research Answer:
BN does not have a legal obligation to the preferreds. That being said, a default on these shares would be very detrimental to the group's overall investor confidence, and we would assume the parent would support them, but only up to a point. If things got so bad that the parent company's solvency was in question, we are quite sure Brookfield would abandon them in order to protect the mother ship. But, two comments on that: First, things would have to get absolutely exceptionally bad to envision such a scenario. Two, Brookfield can be masters of financial restructuring. We are sure it could come up with some sort of equity swap or other arrangement to save the preferreds before it got to such dire measures.