TEXT-S&P rates Ventas new senior notes 'BBB'

Fri Apr 13, 2012 1:52pm EDT

April 13 - Standard & Poor's Ratings Services today assigned its 'BBB' issue
rating to the $600 million 4% senior unsecured notes due in 2019 co-issued by
Ventas Realty L.P. and Ventas Capital Corp., both subsidiaries of Ventas Inc.
. The notes will be guaranteed by the parent and will rank equally with
the company's existing senior unsecured obligations. The company intends to use
proceeds to reduce indebtedness outstanding under its revolving credit facility
and for working capital purposes. As of Jan. 31, 2012, there was $645.5 million
outstanding under the company's $2 billion revolving credit facility due Oct.
16, 2015.	
	
Our ratings on Chicago-based Ventas reflect its "satisfactory" business risk 	
profile supported by the REIT's large portfolio of diverse health care 	
facilities. The company has funded significant growth with substantial equity, 	
which has bolstered credit measures, and in our view, provides sufficient 	
flexibility to withstand some degree of economic and regulatory headwinds over 	
the next few years. Ventas also benefits from relatively limited exposure to 	
Medicare and Medicaid, which reduces the portfolio's exposure to government 	
reimbursement risk, since private pay sources either contribute or support 	
approximately 70% of the REIT's net operating income (NOI). However, income 	
from senior housing assets that Ventas owns and operates through a taxable 	
REIT subsidiary contributes 25% of NOI. (The subsidiary is a structure created 	
through the REIT Investment Diversification and Empowerment Act of 2007 	
{RIDEA}.) Standard & Poor's believes that the use of the RIDEA structure by 	
REITs increases cash flow volatility compared with the traditional 	
triple-net-leased structure, which requires the tenant to pay all 	
property-level costs, such as taxes and maintenance expenses. This 	
particularly applies to the senior housing segment, which is more dependent on 	
macroeconomic trends than many other health care asset classes. 	
	
Our 'BBB' corporate credit rating on Ventas is also supported by the company's 	
"intermediate" financial profile. The REIT has financed its growth over the 	
past year with substantial equity, resulting in credit metrics that are 	
generally better than its rated health care REIT peers. The company's 	
financial risk profile is further bolstered by adequate liquidity and strong 	
standing in both the equity and debt markets.	
	
The stable outlook reflects our expectation that Ventas will continue to 	
finance acquisitions with sufficient equity to maintain an intermediate 	
financial risk profile. We expect the company's debt- to-book capital ratio to 	
remain in the low to mid 40% area, and we Ventas to sustain debt-to-EBITDA at 	
around 5x. We could lower the rating if fixed-charge coverage approaches the 	
low 2x area on a sustained basis, due either to large debt-financed 	
acquisitions, or a material deterioration in Ventas' senior housing portfolio, 	
perhaps due to a prolonged economic downturn. We could raise the rating if 	
Ventas sustains its current credit metrics while continuing to integrate last 	
year's sizeable Atria Senior Living Group and Nationwide Health Properties 	
Inc. acquisitions. We would also expect Ventas to maintain occupancy and rents 	
in its large senior housing platform despite our outlook for weak economic 	
growth over the next year.	
	
Related Research And Criteria	
     -- Industry Economic and Ratings Outlook: Gradual Improvements In 	
Operating Fundamentals Continue To Supports North American REITs, published 	
Feb. 3, 2012.	
     -- Issuer Ranking: North American REITs And Real Estate Operating 	
Companies, Strongest To Weakest, published Feb. 3, 2012.	
     -- Credit FAQ: How Standard & Poor's Applies Its Liquidity Descriptors 	
For Global Corporate Issuers To North American Real Estate Companies, 	
published Oct. 12, 2011.	
     -- Methodology And Assumptions: Liquidity Descriptors For Global 	
Corporate Issuers, published Sept. 8, 2011.	
     -- Key Credit Factors: Global Criteria For Rating Real Estate Companies, 	
published June 21, 2011.	
	
Ratings List	
Ventas Inc./Ventas Capital Corp./Ventas Realty L.P.	
  Corporate credit             BBB/Stable/--	
	
Ratings Assigned	
	
Ventas Capital Corp./Ventas Realty L.P.	
 $600M 4% sr unsecd nts due 2019     BBB	
	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 	
by this rating action can be found on Standard & Poor's public Web site at 	
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