Fitch revises Simon Property view to negative

Fitch Ratings said it affirmed the long-term issuer default ratings of Simon Property Group, Inc. and its operating partnership Simon Property Group, LP at A and revised the outlook to negative from stable.

“The negative outlook reflects the weaker credit protection metrics, particularly net debt to recurring EBITDA and UA/UD, stemming from SPG's 80% acquisition of TRG for $3.6 billion at the company's share. The principally debt-funded investment will increase SPG's leverage to 5.8x at closing from 5.1x, which is above Fitch's 5.5x negative rating sensitivity for the A rating. Fitch estimates that higher unsecured revolver borrowings to fund the acquisition will reduce SPG's unencumbered asset coverage of unsecured debt to the mid-2x range from the low-3x range,” Fitch said in a press release.

Fitch forecasts muted earnings growth in the near term will challenge SPG's ability to reduce leverage to pre-transaction levels and back within Fitch's negative leverage sensitivity, absent equity issuance or third-party capital investment.

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