MI-REIT – BT

MI-Reit to refinance $201m of debt by Jan

Disclosure comes after Moody’s cuts rating, with possible further downgrade

MACARTHURCOOK Industrial Reit (MI-Reit) said yesterday it aims to refinance some $201 million of debt due in April 2009 by the end of January next year.

MI-Reit announced the plan a day after Moody’s Investors Service downgraded the Reit’s corporate family rating to Ba2 and said it remains for a possible further downgrade.

‘The rating remains on review for downgrade primarily to reflect ongoing concerns surrounding MI-Reit’s significant refinancing risk, with 91 per cent of its total debts, or $201 million, falling due in April 2009 amid very challenging credit markets conditions,’ said Kathleen Lee, Moody’s lead analyst for the trust.

She also said the trust has an outstanding put- and-call option on plot 4A of International Business Park, which if completed by end-December 2009 on fully debt-financed terms, will result in a ‘material weakening of (the Reit’s) credit metrics’.

‘There also remains considerable uncertainty as to how this acquisition will be funded if the put option is exercised by the vendor,’ Ms Lee said.

In response, MI-Reit said yesterday it expects to finalise negotiations to refinance the bulk of its debt maturities by the end of January 2009.

And as for the new acquisition, finance will be sought via negotiations with banks, MI-Reit told BT.

The planned $91 million acquisition will lift the trust’s gearing from around 39 per cent now to about 47 per cent.

Moody’s said it also downgraded MI-Reit because it feels the Reit is not likely to meet the scale and diversity targets that were built into its original rating.

The Reit now shows high levels of asset and tenant concentration, more consistent with a Ba2 rating, Moody’s said.

MI-Reit, one of the smallest industrial Reits in Singapore, owns 21 properties worth a total of $559.9 million.

But being small does not mean the trust is riskier, MI-Reit told BT yesterday.

MI-Reit shares lost 0.5 cent to close at a one-year low of 25.5 cents yesterday. The stock has lost 76.8 per cent this year.