S&P downgrades FCT's ratings on cash flow impact from coronavirus

S&P Global Ratings has lowered Frasers Centrepoint Trust's (FCT) long-term issuer credit rating to BBB from BBB+ as it believes FCT's cash flow will be hit hard by the coronavirus pandemic, it said on Monday.

Correspondingly, S&P also lowered the rating on senior unsecured notes issued by FCT MTN and guaranteed by FCT to BBB from BBB+.

In addition, the ratings agency has placed the retail real estate investment trust's (Reit's) ratings on "CreditWatch with negative implications" as FCT has "limited rating buffer against the Covid-19 pandemic", given that the extent and severity of impact remain uncertain.

FCT's cash flow will be hurt in fiscal 2020 due to rental rebates and rental moratorium amid disrupted operations and a weakened economic environment, S&P said.

It estimated FCT's adjusted free operating cash flows to decline around 40 per cent to between S$60 million and S$80 million in FY2020, from about S$118 million last year. This is "due to the adverse impact of Covid-19 and the stringent measures imposed by the Singapore government to curb transmission", the agency added.

Meanwhile, S&P does not expect any liquidity issues for FCT, and said its sources of liquidity are likely to be sufficient this year.

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However, it noted FCT's liquidity sources are weaker than that of other regional retail Reits.

Resolving the CreditWatch status will involve assessment of the Reit's ability to manage its liquidity position during the Covid-19 pandemic, S&P said.

FCT units were up S$0.10 or 5.2 per cent at S$2.03 during the midday break on Tuesday.