Bangkok--28 Jun--Moody's Investors
Moody's Investors Service has changed to stable from negative the outlook of CapitaMall Trust's ("CMT") A2 corporate family rating and A3 senior unsecured debt rating.
"The rating action reflects CMT's improved balance-sheet cash position, a trend of positive rental reversion, and its increased use of medium term notes to diversify the source of funding and lengthen its debt maturity,"
says Peter Choy, a Moody's Vice President and Senior Credit Officer.
"In addition, CMT's debt leverage has fallen and returned to 30% - 35% of total assets due to its raising of S$1.2 billion in new equity in 2009,"
says Choy.
At the same time, CMT's A2 corporate family rating continues to reflect its leading position as Singapore's largest retail REIT, with a track record of high occupancy rates and stable recurring cash flow.
And while its properties are concentrated in Singapore, its tenants are diversified, showing a broad range of sectors.
Moreover, CMT's ratings recognize its proven ability to access the debt and capital markets and leverage the strength of its sponsor, CapitaLand Group, which is approximately 40% owned by Temasek (Aaa/stable).
On the other hand, the rating is constrained by CMT's low degree of financial flexibility, due to its high level of asset encumbrance and modest debt coverage ratios, including Debt/EBITDA of around 7x and EBITDA/interest of about 3x.
The A3 debt rating is one notch below CMT's corporate family rating of A2, reflecting legal subordination risk, given that secured debt accounts for 25% of total assets.
Upward rating movement is unlikely, given CMT's relatively small size, the modest nature of its financial profile for its A2 rating, and its concentration in Singapore.
Its rating could experience downward pressure if (1) it takes on an aggressive debt-funded acquisition strategy; and/or (2) the operating environment deteriorates, such that it suffers high vacancy rates and a decline in rentals.
In such a scenario, Moody's could consider a downgrade if Debt/EBITDA increases beyond 7x - 8x and EBITDA/interest drops below 3x.
The last rating action on CMT was taken on 29 March, 2010 when Moody's assigned a A3 senior unsecured debt rating to CMT's US$ 2 billion Euro-medium Term Note Program.
The principal methodology used in rating CMT was Moody's Rating Methodology for REITs and Other Commercial Property Firms, published in January 2006 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
CMT, listed in Singapore, is the country's largest retail REIT and owns
14 retail malls. The trust is managed by CapitaMall Trust Management Limited, a wholly-owned subsidiary of CapitaMalls Asia Limited, one of Asia's largest listed shopping mall owners, developers and managers.
CapitaLand Limited remains to be the major shareholder of CapitaMalls Asia Limited with a shareholding of 65.5%.
Hong Kong
Peter Choy
VP - Senior Credit Officer
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Singapore
Philipp L. Lotter
Senior Vice President
Corporate Finance Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308