This article is from the Australian Property Journal archive
RATINGS agency Standard & Poor’s has placed Westfield Group on CreditWatch Negative because it believes group would be too heavily exposed to the weak United States & United Kingdom markets.
Standard & Poor’s Ratings Services has placed its ‘A-’ long-term credit ratings on Westfield Group and related debt issues and programs on CreditWatch with negative implications.
At the same time, the ‘A-2’ short term ratings on Westfield were affirmed.
The CreditWatch action follows Westfield’s announcement that it intends to sell a 50% in 54 Australian and New Zealand shopping centres into an independently owned vehicle, Westfield Retail Trust.
However, Westfield will not own an interest in WRT which will the third largest A-REIT. Instead Westfield will own the responsible entity of WRT and provide all development and construction services to the trust.
S&P credit analyst Paul Draffin said the Australian and New Zealand shopping centre portfolio is the highest-credit-quality asset portfolio within Westfield.
“Accordingly, the proposed divestment would represent a material reweighting of the group’s earnings and business risk profile toward WESTFIELD’s US and UK asset portfolios, and toward the group’s development and construction activities,” he added.
Draffin said the key sensitivities in resolving the CreditWatch will be the impact of this transaction on Westfield’s future earnings and asset composition.
The agency is also worried about the group’s growth strategy and appetite for development and construction risk and future anticipated capital needs.
Finally S&P is concerned about the group’s currency exposure associated with its leverage profile across each geographic region.
“At this stage, our expectations are that the long term ratings on Westfield will either be affirmed at the ‘A-’ level or lowered by one notch.
“We expect the Creditwatch to be resolved following the outcome of the shareholder vote for the proposed demerger, which is scheduled to occur on December 9 2010,” he concluded.
Australian Property Journal
