S&P lowers Morguard ratings

Standard & Poor's said it lowered its long-term corporate credit rating on Morguard REIT to BB from BB+, the senior secured debt ratings on Morguard's five series of first mortgage bonds to BBB from BBB+, and the debt rating on Morguard's second mortgage bond to BB+ from BBB-.

The outlook is stable.

S&P said the ratings were lowered due to the trust's declining credit measures in the past number of years, stemming from increases in debt and interest expense assumed from transactions during a time of relatively low cash flow growth. As a result, the trust's debt to total book value of capital has increased to about 68% as of Sept. 30, up from 65% at year-end 2002 and 57% at year-end 2001.

In addition, Morguard's debt service coverage ratio has slipped to about 1.5x, about the same as at year-end 2002 and down from 1.7x at year-end 2001. EBITDA interest coverage at 1.85x has fallen below the 2.0x at year-end 2002.

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