MI-REIT – BT
Moody’s downgrades MI-Reit again
MOODY’S Investors Service has downgraded Mac- arthurcook Industrial Reit (MI-Reit) for the second time in 10 weeks.
In the latest move, the ratings agency cut the trust’s corporate family rating from Ba2 to B1. And the rating remains on review for possible downgrade, Moody’s added.
‘The downgrade reflects MI-Reit’s heightened liquidity pressure as the refinancing of its $201 million loan maturing in April 2009 remains unresolved,’ Moody’s vice-president and senior analyst Kathleen Lee said in a statement yesterday.
MI-Reit’s units closed at 23.5 cents on the Singapore Exchange yesterday – an 80 per cent slide from $1.20 last Feb 29.
Many Singapore Reits are saddled with refinancing difficulties in the current tight credit market, as well as operating weakness amid the recession.
MI-Reit said on Nov 26, 2008 that it expected to finalise negotiations on refinancing its debt maturities by the end of January this year.
Moody’s pointed out that the trust is still negotiating with its incumbent lenders. ‘However, the terms and conditions – as well as the time frame to complete the negotiation – are still uncertain for the time being,’ Ms Lee said.
Yesterday’s downgrade reflects the fact that besides debt maturities due in April, MI-Reit has an unfunded finance need of $91 million to purchase plot 4A at International Business Park in Jurong by the fourth quarter this year.
‘This presents an additional funding challenge … in the prevailing weak credit environment,’ Moody’s said.
Its ratings downgrade reflects its concern that MI-Reit’s strategic direction and asset profile are increasingly uncertain due to the trust’s lack of access to capital, limited operating scale and modest franchise, it explained.
The review for a possible further downgrade will focus on two things – progress in, and terms of, refinancing efforts for MI-Reit’s debt maturing on April 17; and funding for the International Business Park plot under a sale and lease-back call-and-put option by Q4.
In August 2007, MI-Reit said it had agreed to buy Plot 4A from Eurochem Corporation, a member of Tolaram Group.
The project comprises a 13-storey office building with a basement car park, slated for completion in 2009. Eurochem will lease back the asset from MI-Reit under the deal.
Moody’s said MI-Reit’s rating could be downgraded again if material progress on securing committed finance for its April 2009 debt maturities is not made in the next two months.
Moody’s downgraded the trust to Ba2 on Nov 26 last year.