This article is from the Australian Property Journal archive
STANDARD & Poor’s has revised its outlook on Mirvac’s long-term issuer credit rating from positive to stable because of the group’s development pipeline.
At the same time the ratings were affirmed at ‘BBB/A-2’.
Credit analyst Paul Draffin said the revision reflects S&P’s expectation that the capital demands of Mirvac’s development pipeline, together with funding of recent acquisitions, will limit further improvement in the group’s credit profile in the next couple of years.
“The ratings on Mirvac Group… reflect our opinion of the relatively stable earnings generated from the group’s diverse property investment portfolio and Mirvac’s moderate financial policies. These strengths are tempered by the group’s exposure to cyclical property markets and the volatile cash flow and lumpy capital requirements of the group’s property-development operations.
“The stable outlook reflects our view that the group’s diverse investment portfolio, long-term lease-expiry profile, and moderate financial policies should temper the risks associated with the group’s development activities and underpin rating stability,” he added.
“Nonetheless, we consider that the June 2009 equity raising, together with the increase in investment income from the recent Westpac Office Trust acquisition, should underpin rating stability at the ‘BBB/A-2’ rating level.
“A financial profile consistent with the ‘BBB’ long-term rating would include an adequate liquidity profile, fully adjusted FFO to total debt above 12%, EBITDA interest cover (including capitalised interest) at about 2.5x or more, and debt-to-debt plus equity at about 30%. Furthermore, we would expect these earnings-based metrics to exceed these levels in periods of buoyant property development earnings,” he concluded.
Australian Property Journal
