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Fitch rates Mapletree Industrial Trust's new notes 'BBB+'
FITCH Ratings on Tuesday assigned Mapletree Industrial Trust's (MIT) new S$60 million 3.79 per cent fixed-rate unsecured and unsubordinated notes due in March 2026 a rating of "BBB+".
The agency has also affirmed MIT's "BBB+" long-term ratings on the outstanding S$245 million unsecured unsubordinated medium-term notes.
The new and the outstanding notes are guaranteed by DBS Trustee, and are part of MIT's S$1 billion multi-currency medium-term note programme.
Fitch expects MIT to use the proceeds to refinance part of its debt that falls due in the fiscal year ending March 31, 2017.
"MIT's funding costs are likely to increase in 2016, albeit from a low of 2.4 per cent in Q3 FY16, because around S$420 million of existing interest-rate hedges will expire over the period.
"The new issue will also lengthen MIT's weighted average debt maturity of 3.6 years as of 31 December 2015. MIT has sufficient unutilised credit facilities, as well as available cash to meet its debt servicing and committed capex in FY17 and FY18," it said.
Fitch noted that the trust has good assets, albeit a "granular portfolio", in that it has low industry and tenant concentration, with no single industry accounting for more than 16 per cent of revenue, and the 10 largest tenants contributing to around 17 per cent of revenue.
MIT continues to record positive rental rollover rates. Its portfolio-wide rent per square foot increased to S$1.89 in Q3 FY16, up 3.3 per cent from Q3 FY15. The quarterly occupancy rate has remained over 90 per cent on average since it listed in October 2010.
The trust also has strong financing flexibility, with low interest-rate risk and strong financing flexibility. As at end-2015, MIT had an FFO (funds from operation) fixed-charge coverage ratio of over nine times. This ratio measures its ability to pay all of its fixed charges or expenses with its income before interest and income taxes. More than 85 per cent of its debt is hedged or priced at fixed interest rates. It has zero encumbrances on its assets.
It is also able to get competitively priced debt funding and strategically located investment properties because of its strong sponsor, Mapletree Investments.
That said, MIT's rating is constrained because its assets are concentrated within Singapore, and it has limited operating scale compared to higher-rated global property investment companies.
For this reason, Fitch said "no positive rating action is expected in the medium term": given its geographic concentration and limited scale.