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TEXT-Fitch assigns Unibail convertible bond 'A+' rating
(The following statement was released by the rating agency)
Sept 19 - Fitch Ratings has assigned Unibail-Rodamco SE's (Unibail) EUR750m January 2018 convertible bond a 'A+' rating. Fitch has also affirmed Unibail's Long-term Issuer Default Rating (IDR) at 'A', Short-term IDR at 'F1' and senior unsecured rating at 'A+'. The Outlook on the Long-term IDR is Stable.
The convertible bond will be used to continue Unibail's strategy of diversifying funding sources and enhancing its already strong liquidity and debt profile. The convertible bond is senior unsecured and mirrors the covenant structure of Unibail's other senior unsecured debt.
The new instrument is classified as a hybrid, and as such the rating assigned is based on Fitch's respective criteria. Key features of the instrument are the presence of optionality, and restriction that only holders of the convertible can exercise the conversion right. Consequently, Fitch treats this instrument for its pre-conversion characteristics, notably senior unsecured debt.
Unibail continues to maintain strong financial metrics despite the challenging European retail property environment. Fitch-adjusted group leverage was stable at 38% at June 2012. Its liquidity position remains one of the strongest in the EMEA REIT sector with around EUR3.5bn of undrawn committed facilities at H112. The ratings also reflect the company's status as the third-largest REIT in the world, a large retail and office portfolio that is diversified by both geography and sector, low vacancy rates and excellent tenant profile, which gives sound defensive qualities in a property downturn.
WHAT COULD TRIGGER A RATING ACTION IN THE FUTURE?
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
- Confirmation of Fitch's rating case forecasts of NIC above 3.5x for two consecutive years
- Asset cover to remain above 2.25x in four year forecasts
- Significant lettings on currently unoccupied space
Negative: Rating issues that may both individually or collectively, lead to a negative rating action include:
- Significant rise in tenant defaults and lease arrears, leading to a material fall in total rents
- EBIT NIC below 2.5x over a two-year period
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