new bond issue by brookfield multiplex

Brookfield is issuing a new retail bond. Its a 57m issue and it is secured by a single A grade Sydney property with 100% government lease. LVR on the property is 60%. The bonds are senior secured. The bond will have a 3 year bullet maturity. This is currently in bookbuild but the expected margin is BBSW+3.00%.

MXUPA step up margin is about 4.00%. Given that this current issue is essentially government risk and is getting done at 3.00% I would assume that any MXUPA refi in May 2010 would get done at spread MUCH LARGER than 3.00%.

Brookfield have stated that they want to so several more of these single property retail bond issues. Hence, there is a possibility that Brookfield essentially replace the SITES debt with a series of these issues. This would create VERY GOOD sentiment for Brookfield which would give them a more respectable name in the credit world which would in turn allow them a cheaper cost of funds in the long term.

Obviously, this recent issue exemplifies the fact that banks have shut down commercial property lending and that property companies now have to diversify their funding sources. Looking at it from this perspective it would appear that Brookfield may let MXUPA step up and keep the funding line open for as long as possible.

Assuming credit spreads do not move from here, is it the opinion of the members of this forum that Brookfield will let MXUPA step up? What are th arguments for both sides of the case? What have Brookfield management stated in regards to this issue?