Moody's cuts Equity Office to junk

Moody's Investors Service said it downgraded Equity Office Properties Trust's preferred stock to B2 from Baa3, EOP Operating LP's senior long-term debt to Ba3 from Baa2 and senior unsecured medium-term notes to Ba3 from Baa2 and Spieker Properties, LP's senior unsecured debt to Ba3 from Baa2 following the acquisition of the company by The Blackstone Group on Feb. 9.

The agency does not expect there to be adequate information for it to monitor Equity Office going forward, so it will withdraw the ratings.

Moody's said the downgrade reflects the more aggressive capital strategy that will be employed by Blackstone. Leverage is expected to rise to almost 80% of total assets, most of which is expected to be secured. In addition, $8.1 billion of Equity Office's $8.4 billion of bonds have been tendered, and a consent solicitation stripped out substantially all of the restrictive bond covenants that the company's debtholders have enjoyed.

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