Moody’s eyes Spirit Realty for upgrade

Moody's Investors Service said it placed Spirit Realty, LP's Baa2 backed senior unsecured rating and (P)Baa2 backed senior unsecured shelf rating under review for upgrade. The agency also placed Spirit Realty Capital, Inc.'s Baa3 preferred stock and (P)Baa3 preferred shelf ratings under review for upgrade.

The review follows Spirit's announcement that it agreed to be acquired by Realty Income Corp. in an all-stock transaction, including the assumption of debt valued at around $9 billion. The deal is expected to close in the first quarter of 2024 and is subject to customary closing conditions and shareholder approval.

“The review for upgrade for Spirit is based on Moody's assessment of the merger structure, and the expectation that Realty Income will assume Spirit's existing debts. The review for upgrade reflects our view that Spirit's credit profile would improve should it complete the merger, as it would be part of a much larger company, including benefits of scale, diversification and increased cost synergies. If the merger closes as proposed, Spirit's senior unsecured ratings will be upgraded to Realty Income's senior unsecured rating, currently at A3,” Moody’s said in a press release.

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