Moody's maintains A3 rating for Ascendas Reit

MOODY'S Investors Service is maintaining its A3 rating and positive outlook for Ascendas Real Estate Investment Trust (A-Reit) following the Reit's announcement on Sept 7 that it had raised S$452.1 million of equity in a private placement of new units. In a note on Thursday, the ratings agency noted that the transaction is credit positive as the equity proceeds "will be used to pre-fund planned capital investments, thereby alleviating the need to rely on fresh borrowings" and that Ascendas Reit also indicated that it may use part of the proceeds to reduce debt.

The new units, constituting around 5.7 per cent of the Reit's pre-transaction issued share capital, were placed at S$2.54 per unit, a 3.5 per cent discount to the Reit's adjusted volume-weighted average unit price on Sept 6, 2018.

Moody's said it expected the Reit's pro forma leverage, measured by adjusted net debt or Ebitda (earnings before interest, taxes, depreciation and amortisation) to improve and stabilise at 6.1 to 6.2 times over the next 12 to 18 months, compared to its original projections of 6.4 to 6.5 times. The Reit's adjusted debt or deposited assets are also expected to improve to around 36.5 per cent in the same period, compared to Moody's earlier forecast of 39 per cent.

These projections assume that Ascendas Reit will put the net equity proceeds of S$448 million towards acquisitions and other capital investments.

"Our leverage expectations could improve if the trust opts to utilise partial proceeds towards debt repayment," said Moody's.

Moody's also noted the Reit's plans to acquire a portfolio of logistics assets in the United Kingdom and to fund a built-to-suit facility in Singapore.

"A-Reit's equity raising exercise to pre-fund acquisitions and investments highlights its conservative approach towards financial management, particularly in light of the rising interest rate environment. We expect the trust will continue to exercise financial prudence as it pursues portfolio growth going forward," said Moody's.