Moody's may downgrades Frasers

Moody's Investors Service said it placed on review for downgrade the Baa1 issuer rating of Frasers Centrepoint Trust.

The review follows news that Frasers entered into 12 conditional sale and purchase agreements to acquire a 17.1312% stake in PGIM Real Estate AsiaRetail Fund Ltd., an open-ended private investment vehicle set up as a company incorporated in Bermuda and the largest non-listed retail mall fund in Singapore, Moody's said.

The agency said it will assess any he potential weakening of Frasers Centrepoint's credit metrics if the proposed transaction is funded substantially with debt.

PGIM owns and manages six retail malls in Singapore, one office property in Singapore and four retail malls in Malaysia, Moody's said.

The acquisition, assuming it is 60% funded by debt, will increase Frasers total borrowings by S$205.5 million and weaken its leverage to about 7.2x, from 6.4x as of December 2018, eroding headroom under the downgrade trigger level of 7.5x, the agency said.

A meaningful equity issuance would be credit positive as it will help to partially correct leverage, Moody's added.

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