(The following was released by the rating agency)
Dec. 7, 2010--Standard & Poor's Ratings Services today said that it had affirmed its 'A-' long-term and 'A-2' short-term ratings on Westfield Group (Westfield) and Westfield's related debt issues and programs. At the same time, the long-term ratings were removed from CreditWatch with negative implications, where they were placed on Nov. 3, 2010. The outlook is stable. This rating affirmation follows our assessment of Westfield's proposed demerger of about half of its Australian and New Zealand shopping centre portfolio.
"In our view, the proposed demerger moderately weakens Westfield's strong business risk profile, by reweighting the group's earnings and asset base toward its U.S. and U.K. portfolios, and to the group's funds management and construction and development operations," Standard & Poor's credit analyst Paul Draffin said. "Nonetheless, we consider that Westfield will remain one of the largest, highest-quality, and most geographically diversified global retail property groups."
Although Westfield's balance-sheet gearing (debt to assets) will be moderately higher following the demerger, we expect the group's key interest-coverage measures to strengthen materially from pre-demerger levels. This will be driven largely by a reweighting of the group's debt portfolio toward lower cost U.S.-dollar-denominated debt facilities. Although the benefit of these low-cost debt facilities may unwind over time, we also expect some near-term deleveraging of the group's balance sheet, driven by Westfield's lower distribution payout ratio and reduced capital-expenditure requirements.
Mr. Draffin added: "The stable outlook reflects our expectation that Westfield will continue to actively manage its capital base to mitigate the risks associated with the challenging operating environment, volatile capital markets, and the group's development pipeline. For the 'A-' rating, we expect Westfield to maintain a strong liquidity profile, prudent interest rate and currency hedging, and an intermediate financial risk profile."