CAPITACOMMERCIAL Trust (CCT) faces a possible ratings downgrade after it said on Thursday that it would buy the prime office building at 1 George Street for $1.17 billion.
Ratings agency Moody’s Investors Service yesterday placed the trust’s ratings ‘on review for possible downgrade’, it said in an e-mail. The move stems from concerns that the proposed acquisition, which is to be fully funded through debt that CCT has already secured, will ‘weaken CCT’s financial metrics’, said Moody’s vice-president and senior analyst Kathleen Lee.
CCT’s corporate family rating is now A3, or upper- medium grade. Its senior unsecured debt rating is Baa1, meaning it is subject to moderate credit risks.
Ms Lee, however, was quick to add that CCT’s ability to line up enough debt funding for the deal in the first place ’speaks of its ability to maintain funding access amid a weak credit environment’. She also said buying 1 George Street would enhance the ‘asset quality and income diversity’ of the $5.1 billion trust.
She said, though, that CCT’s weaker credit metrics were unlikely to improve soon without an equity injection, which was unlikely given the state of the equity markets.
CCT is not the only Singapore-listed property trust to deal with ratings issues. Allco Reit hit headlines last week for going to court to fend off a downgrade.
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