Saizen – BT

Saizen may get rating boost on clearing defaulted debt

SAIZEN Reit’s corporate family rating is up for a possible upgrade to positive by Moody’s following its plans to repay a loan that went into maturity default in November 2009.

‘The repayment plan is a positive action in resolving the defaulted commercial mortgaged-backed-securities loan of YK Shintoku,’ said Moody’s senior vice-president Philipp Lotter.

The manager of the purely Japanese Reit play said on Wednesday that the 4.2 billion yen (S$62 million) outstanding loan balance under its YK Shintoku portfolio can be repaid by the end of May this year.

The loan had been in default due to the collapse of the commercial mortgage-backed securities market in Japan in 2008. Since then, Saizen has been repaying the loan from its operational cash flow and the sale of its property assets.

Moody’s last revised Saizen’s Caa1 corporate family rating in June 2010 from negative to stable.

In this review of Saizen Reit’s outlook, Moody’s will consider Saizen’s credit profile after the loan repayment, its ability to access funding and the extent of damage the Japanese earthquake and tsunami has wreaked on Saizen’s Japanese properties.

Moody’s observed that after the defaulted YK Shintoku loan is settled, the next material debt of 5.7 billion yen would mature in 2013.

‘Moody’s estimates that Saizen has unencumbered assets of around 11.5 billion yen which are available to repay the YK Shintoku loan and other maturing debts,’ it said yesterday.

Saizen Reit’s manager laid out a repayment schedule that spans across three instalments, mostly through cash, but also through proceeds raised from property sales under three portfolios: YK Shintoku, YK Shingen or YK Keizan.

Saizen’s first repayment of at least two billion yen will be in cash on April 11. Between April 12 and May 30, there will be a repayment of about 800 million yen from property sales proceeds. Saizen will repay the difference – about 1.4 billion yen – with internal resources.

The Saizen Reit counter closed trading unchanged at 15 cents yesterday.