Magazine article Mortgage Banking

Simon Property Ratings under Review. (Commercial)

Magazine article Mortgage Banking

Simon Property Ratings under Review. (Commercial)

Article excerpt

MOODY'S INVESTORS SERVICE IN MID-JANUary placed the ratings of Simon Property Group (senior unsecured at Baa1) under review for possible downgrade. The rating action follows the announcement by Simon, The Rouse Co. and Westfield America Trust of a definitive agreement to jointly acquire and split the U.S. regional mall portfolio of Rodamco North America. As a part of this transaction, Simon will obtain Rodamco's ownership interests in 13 high-end regional malls for about $950 million in cash and $570 million in assumed mortgage debt and preferred stock. Simon will initially fund the cash portion of the transaction with bank debt. Moody's review will focus on the structure and timing of the permanent funding for this acquisition, and on the real estate investment trust's (REIT's) overall leverage profile that will begin to emerge after the transaction closes in the second quarter of 2002. According to Moody's, this rating action reflects the possibility that Simon's financial profile will deteriorate as a resu lt of this highly leveraged transaction. Moody's notes that prior to this announcement, the REIT's rating outlook was negative, reflecting its high financial leverage and weak coverage ratios for its Baa1 rating, in what Moody's believes will be a challenging retail environment. …

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