TEXT-S&P rates Federal Realty's notes 'BBB+'
July 17 - Standard & Poor's Ratings Services today assigned its 'BBB+' rating to the $250 million 3.00% senior unsecured notes due Aug. 1, 2022 issued by Federal Realty Investment Trust (Federal). Federal indicated that it intends to use net proceeds from the offering to repay outstanding borrowings under its revolving credit facility and for general corporate purposes, which may include funding potential property acquisitions or funding the company's redevelopment pipeline. The company offered the notes at 98.743% of the principal amount and the notes offer a yield to maturity of 3.147%. The notes are subject to typical REIT bond covenants including limitations on incurrence of debt such that total debt does not exceed 60% of total assets; secured debt does not exceed 40% of total assets; and debt service coverage will not be less than 1.5x. Further, these notes are subject to the maintenance of unencumbered assets such that unencumbered total assets (excluding unconsolidated investments) exceed unsecured debt by at least 150%. Our 'BBB+' corporate credit rating and positive outlook on Federal reflect the comparatively favorable mark-to-market rent prospects within Federal's high-quality portfolio located in densely populated areas with attractive demographics. Our ratings and outlook are unaffected by the company's recent announcement that it plans to replace its chief financial officer effective Aug. 15, 2012, as we don't believe the company's financial policies will change as a result. Federal's leases are below current market rents on average, which supports our expectation for continued stable cash flow and solid debt coverage measures, as the company demonstrated through the recent economic downturn. Federal's maintenance of a very moderately leveraged balance sheet positions the company to ably meet its capital needs for the next few years and pursue select opportunistic investments. We believe Federal will pursue development such that financial measures will remain at their current strong level through the projects' phased build outs and that liquidity will remain adequate. For our most recent credit analysis on Federal, see Summary: Federal Realty Investment Trust, published April 27, 2012. RELATED CRITERIA AND RESEARCH -- Industry Report Card: Improvements in Operating Fundamentals Bode Well For North American REITs, May 4, 2012 -- Issuer Ranking: North American REITs And Real Estate Operating Companies, Strongest To Weakest, April 30, 2012 -- Credit FAQ: How Standard & Poor's Applies Its Liquidity Descriptors For Global Corporate Issuers To North American Real Estate Companies, Oct. 12, 2011 -- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 8, 2011 -- Key Credit Factors: Global Criteria For Rating Real Estate Companies, June 21, 2011 RATING LIST Federal Realty Investment Trust Rating Corporate credit BBB+/Positive/-- RATING ASSIGNED Federal Realty Investment Trust Rating $250 mil. 3.0% sr. notes due 2022 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 www.standardandpoors.com. Use the Ratings search box located in the left column.
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