Brookfield: 7.2% Yield For 64 Cents On The Dollar With Investment-Grade Baby Bonds

2025-10-06 09:06:05 ET

Brookfield Corporation's ( BN ) 4.625% Subordinated Notes due 10/16/2080 ( BNH ) are cheaper on a comparative basis to their peers while offering a healthy spread over the U.S. 10-year Treasury yield as the Fed is set to cut rates by another 50 to 75 basis points through January 2026. Fixed income has sold off in the weeks following the September 17 move by the Fed to reduce prime rates by 25 basis points, the first cut of 2025, opening up an opportunity to buy more income. Toronto-based BN's primary asset is its 73% ownership of Brookfield Asset Management ( BAM ), a $93 billion asset manager. BAM had over $1 trillion in assets under management ("AUM") as of the end of its fiscal 2025 second quarter and is up substantially over the last year. I've always been a fan of the asset manager business, it's capital-light with a highly recurring and predictable trajectory for cash flow growth. I own a position in BAM and took a position in BNH as it aligned with my investment strategy of buying highly discounted fixed-income securities offering a robust spread over treasuries. BN was last rated investment-grade at " A- " by Fitch Ratings, ramping up the attractiveness of BNH....

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