Fitch puts Associated Estates on negative watch

Fitch Ratings said it placed the BBB- issuer default rating of Associated Estates Realty Corp. on Rating Watch negative following news that the company’s board of directors approved a definitive merger agreement under which a real-estate fund managed by Brookfield Asset Management will acquire all outstanding shares of common stock of Associated Estates for $28.75 per share in cash.

The transaction is valued at about $2.5 billion, including the assumption of debt, Fitch said.

The ratings on watch also include the BBB- rating on the company’s$350 million unsecured revolving credit facility, BBB- rating on its $150 million senior unsecured term loans and BBB- rating on its $250 million senior unsecured notes.

The Brookfield transaction follows Associated Estates’ decision in December to engage a financial advisor to assist its board in conducting a thorough review of its strategy, assets and business plan, the agency said.

The negative watch indicates a heightened probability of a potential downgrade due to uncertainties regarding Brookfield’s strategy for capitalizing Associated Estates, Fitch said.

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