>>They are heavily invested in Brazil and if that economy is among the first to recover, they are going to enjoy an enormous benefit, which will provide a timely counter-point to some of their other ops. <<
This will be dated very shortly, yet interesting enough to see the looks of this debt offering.
No link, sorry.......
The Federated republic of Brazil 500mm Baa1/BBB- Re-Open 5.875% 1/15/2019 guidance 5.80%
>>> Cash less deposits plus monetization of assets post period declined by $405m, financial assets declined by $104m, and gross debt decreased by $204m so debt net of cash & financial assets increased by about $305m during the period despit $273m of reported operating cash flow. <<<
Well suffice it to say that uses of cash outstripped sources of cash in the quarter. From the supplemental:
"During the quarter we deployed approximately $700 million of liquidity, of which
approximately $450 million was invested in our operations to acquire new assets or increase our ownership, including $200 million
invested in equity of affiliates at attractive values; $100 million used to pre-pay the December 2009 corporate maturity within our
power operations; and $100 million used to reduce the leverage of select property development assets."
Obviously with $273M of net OCF that is a ~$427M shortfall which has to come from somewhere. They say they invested "liquidity" and they use the same term to define cash, cash equivalents, and lines of credit, so some of that investment may have come from lines of credit rather than cash or equivalents on hand.
I have often wondered about these "committed" credit facilities, they rely on these heavily and if they ever had a problem with these they'd likely be in trouble. The exposure is spread around various institutions with various maturities, but as Munger has said, when you're always a borrower then people must always think highly of you. That said, Brookfield is famously well-regarded by the Canadian and European banks so they probably have good relationships here even now. This is one of the ways they can continually operate with little cash on hand. All of THAT said I still wish they had a $1-2 billion piggy bank of real cash.
Paging through the supplemental I see various sources and uses of cash, though I have never been able to track this down to my satisfaction due to all of the moving parts. Sources of cash include flows, debt issuances, and disposition proceeds; uses include cap ex, debt pay-downs, and new equity investments. These things show up in too many ways in the financials to tabulate them, and I do wish they had more disclosure here.
In the 2008 year-end letter they provided two tables with the most material capital raising transactions (gross and net) and capital investments (by asset area). I would like to see even more detail on this but this is the kind of thing I'm looking for. Those tables show that they raised $1,465M from dispositions over and above "regular" cash flows, and invested $1,700M.
Even those numbers are muddied because a portion of the $1.4 billion in CFO for 2008 includes some of those dispositions.
Q1 2009 was obviously a weak quarter, which shouldn't be much of a surprise, a 30% decline from a year ago sounds about right to me. But I think they are weathering the storm quite well all things considered.
They are heavily invested in Brazil and if that economy is among the first to recover, they are going to enjoy an enormous benefit, which will provide a timely counter-point to some of their other ops.
In the middle of this storm, I think they have done okay. But how tough is the environment going to be, going forward?
If the situation gets worse, and they manage to hold on to what they have, and assuming inflation down the road, what do you all think about adding to your position?
(Long term hold, 5yrs or more)
Some of the best opportunities are made when the times are tough, but you would not know at the time.
>>> Some of the best opportunities are made when the times are tough, but you would not know at the time. <<<
In 2002, BAM (then known as Brascan symbol BNN) was available for sale at about 60% of liquidation value, and the stock proceeded to increase 300% to today's price. Past performance is no guarantee of future results, but the stock is again available at about 60% of liquidation value.
I find it difficult to make the case that the company should be valued at a substantial discount to liquidation value. It is currently priced as if the assets will take a 25% or more hit, with no value attributed to the fee-earning businesses. Seems very cheap to me.
The shareholder letter is a little longer than usual and has sections that address concerns about commercial real estate. Definitely worth a read.
The quarterly results were okay, not great, but definitely serve to remind everyone that their cash flows are generated based on 5-15 year contracts and thus are largely unaffected by this environment. It's been about 2 years now and they have yet to show any significant impairments. Maybe there's something to this whole long term view thing after all.
>>It's been about 2 years now and they have yet to show any significant impairments. Maybe there's something to this whole long term view thing after all. <<
Of course there is something to long lived assets. BAM has some of the greatest assets in the world. Leverage or needs for cash bring in a different equation.
As long as you have the ability to sit on the assets, and there is ability to financially sustain stress, then the long term concept of course works.
>>>The quarterly results were okay, not great, but definitely serve to remind everyone that their cash flows are generated based on 5-15 year contracts and thus are largely unaffected by this environment.
EPS down 52% and OCF down 36% year-over-year is ok? What exactly would you consider to be bad?