Ascendas Reit subordinated perps will not materially change credit metrics: Moody's

MOODY'S Investors Service on Friday said it does not expect Ascendas Real Estate Investment Trust's (Ascendas Reit) issuance of S$300 million in subordinated unsecured perpetual securities to materially change the Reit's credit metrics.

This is given that the securities will effectively replace the existing perpetual securities which are callable in October 2020, Moody's analyst Tan Junling said in a statement.

The credit ratings agency has assigned a Baa2 rating to the proposed issuance. Its outlook on the rating is stable.

Moody's expects Ascendas Reit's credit metrics to remain within the parameters of its A3 ratings over the next 12 to 18 months, with adjusted net debt/earnings before interest, taxes, depreciation and amortisation (Ebitda) below eight times and adjusted Ebitda/interest expense above 3.5 times.

"This stability despite the coronavirus-led downturn reflects the trust's diversified asset portfolio, wide array of tenants and relatively small exposure to the most affected sectors," Moody's said.

Ascendas Reit's A3 issuer rating is underpinned by its diversified portfolio of high-quality industrial assets across Singapore, Australia, the UK and the US, as well as its established market position as one of the largest industrial Reits in Singapore, the ratings agency noted.

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It added that the Reit has a stable operating track record and resilient income from its properties that captures growth in the third-party logistics, e-commerce, pharmaceutical, medical and IT sectors. Moreover, the Reit has prudent financial policies, demonstrated by its ability to maintain healthy credit metrics even as it continues to grow through acquisitions.

At the same time, Ascendas Reit's ratings are constrained by its acquisitive growth strategy and use of short-term revolving credit facilities, Moody's noted.

It called the Reit's liquidity "inadequate" over the next 12 to 18 months. As at June 30, 2020, the Reit had cash and cash equivalents of S$361 million compared to utilised revolving credit facilities of around S$200 million and upcoming debt maturities of around S$580 million over the next 12 to 18 months.

Nonetheless, Moody's expects this refinancing risk to be mitigated by the Reit's track record of access to funding and established banking relationships.

Ascendas Reit units were trading down S$0.02 or 0.6 per cent to S$3.25 as at the midday break on Friday.