Moody's cuts MEPC senior debt to Ba3

Moody's Investors Service said it lowered to Ba3 from Ba2 the long-term senior unsecured rating of MEPC Ltd.

The outlook is negative.

The ratings lowered include MEPC Ltd.'s rating for senior unsecured bonds and issuer rating to Ba3 from Ba2 and MEPC International Capital LP's rating for guaranteed preferred securities to B2 from B1.

Moody's said that the downgrade reflects the deterioration in MEPC's business risk profile due to continued weakness in its core business parks market. Higher voids, lower headline rents and longer rent free periods on the company's business parks assets are likely to pressure rental income in the short- to medium-term.

The lower rating also factors in the company's reduced financial flexibility following the large dividend payment in the last financial year, which is reflected in low interest coverage and high gearing.

More positively the Ba3 rating recognizes the consistent performance of MEPC's factory outlet portfolio, as well as its cautious approach to new development risk. It also takes account of the group's adequate liquidity profile on the basis of the £350 million loan facility recently agreed with BTPS, the rating agency added.

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