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MOODY'S Investors Service yesterday downgraded Macarthurcook Industrial Reit's (MI-Reit) corporate family rating from B1 to B2, and added that it is continuing its review of the rating for possible further downgrade.
'The downgrade reflects the existence of heightened liquidity pressure, given that the company has not yet secured definitive long-term refinancing for its $201 million loan originally due on April 18, 2009,' said Kathleen Lee, vice-president/senior analyst and lead analyst for the trust.
'The downgrade to B2 also reflects Moody's concerns that MI-Reit has unfunded financing needs of $91 million for the completion of a put and call option over 4A International Business Park by Dec 31, 2009; a situation which means funding challenges, given tight credit market conditions and the trust's limited financial flexibility, as all its assets are encumbered to existing lenders.
'Moreover, MI-Reit's committed acquisition was priced at a time when real estate values were still on the uptrend in August 2007, while the values of industrial property assets have softened from Q4 2008.'
In its release, Moody's observed that on Tuesday, MI-Reit announced that its existing bankers, Commonwealth Bank of Australia Limited and National Australia Bank Limited, have granted a 60-day extension to June 16 for the $201 million maturing debt.
'And while Moody's recognises the steps taken by the trust to address this maturing loan, it remains uncertain as to what terms and conditions will accompany any refinancing exercise,' Ms Lee said.
Moody's review for possible further downgrade will focus on MI-Reit's progress in, and the terms of, the refinancing efforts for its debt maturing on June 16; funding of the 4A International Business Park acquisition under a 'sale and lease back' call and put option by Dec 31 2009; and steps to refinance the company's loan of 1.5 billion yen (S$23 million) due in December this year.
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