Moody's changes FCT outlook to stable, affirms Baa2 rating on AsiaRetail Fund deal

MOODY'S Investors Service has affirmed Frasers Centrepoint Trust's (FCT) Baa2 issuer rating and changed the outlook on the rating to stable from negative.

The rating action comes after FCT proposed to acquire the balance 63.1 per cent stake in PGIM Real Estate Asia Retail Fund, raise up to S$1.39 billion through an equity offering, and divest Bedok Point for S$108 million to its sponsor Frasers Property.

Moody's analyst Sweta Patodia said the change in outlook to stable reflects FCT management's commitment to maintaining its credit profile as evidenced by its planned equity issuance and asset disposal, which in turn will also help to enhance the trust's liquidity profile.

The change in outlook also takes into account the improvement in tenant sales and shopper traffic at FCT's malls, which have "rebounded strongly" following a slump during the "circuit-breaker" period in Singapore, she added.

Meanwhile, the affirmation of FCT's Baa2 rating balances the rating agency's expectation that FCT's business profile will "improve considerably" after the proposed acquisition is completed, but that its leverage will remain elevated over the next 12 to 18 months, Ms Patodia said.

If completed, FCT's asset size will increase by almost 70 per cent to S$6.6 billion from S$3.9 billion currently. The retail real estate investment trust will also become the second-largest mall owner in Singapore after CapitaLand Mall Trust (CMT), with ownership of 6 per cent of total retail space in the country, Moody's report noted. (amendment note)

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Amendment note: An earlier version of this article, quoting the Moody's report, stated that FCT will own 10.2 per cent of total suburban retail space, versus CMT's 10.6 per cent. CapitaLand has since clarified that the basis of comparison for these figures is different, as FCT's figure is for its share of suburban retail space in Singapore, whereas CMT's figure refers to its share of the entire basket of private retail stock in Singapore. The relevant paragraph has thus been removed.