This article is from the Australian Property Journal archive
FITCH Ratings has removed Westfield’s long term ratings from CreditWatch with negative implications, as the new spin off Westfield Retail Trust prepares to float after raising $2.01 billion.
Westfield was placed on CreditWatch last month after Fitch said the proposed demerger of about half of its Australian and New Zealand shopping centre portfolio would moderately weakens Westfield’s strong business risk profile, by reweighting the group’s earnings and asset base toward its United States and the United Kingdom, and to the group’s funds management and construction and development operations.
However yesterday Standard & Poor’s credit analyst Paul Draffin said despite the demerger, 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,” he added.
Draffin said the stable outlook reflects 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.
Meanwhile Westfield announced that the Westfield Retail Trust has raised $2.01 billion priced at $2.75 per unit.
Although it fell short of Westfield’s targeted $3.5 billion, it was well in excess of the underwritten amount of $1.75 billion.
The proceeds of the offer will be used to pay down drawn amounts under the acquisition facility and as a result, WRT is expected to have a conservative gearing ratio of approximately 21.5%.
For the financial year ending 31 December 2011, WRT is expected to achieve earnings per stapled unit of 18.3 cents and a distribution per stapled unit of approximately 16.5 cents.
Westfield Retail Trust stapled units are expected to commence trading on the Australian Securities Exchange on Monday 13 December 2010.
Australian Property Journal
