S&P rates Kilroy notes BBB-

Standard & Poor’s said it assigned a BBB- rating to the $400 million 4.25% senior notes recently issued by Kilroy Realty LP, which is the operating partnership of Kilroy Realty Corp.

The existing ratings on Kilroy, including its BBB- corporate credit rating, are unchanged.

The outlook is positive.

The proceeds will be used to repay two unsecured note obligations totaling $255 million, which are set to mature in August and November 2014, with the balance available to pay down revolver borrowings that stood at $90 million as of June 30.

The new debt-for-debt financing will not affect the existing ratings or positive outlook on Kilroy.

However, the agency said it noted that the 15-year notes will lengthen debt duration about six years and the financing should be modestly accretive to cash flow, given the attractive 4.25% rate relative to the cost of the debt that will be repaid.

The recent outlook revision was based on stronger operating fundamentals in Kilroy’s West Coast office markets, S&P said.

The agency also said it expects the company’s aggressive portfolio repositioning and its profitable development pursuits to increase cash flow.

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