S&P cuts Kennedy-Wilson Holdings

S&P said it lowered its ratings for Kennedy-Wilson Holdings Inc. to BB from BB+ and Kennedy Wilson Europe Real Estate plc's senior unsecured notes to BB+ from BBB-, with the recovery rating remaining 2. The agency also cut the issue-level rating on Kennedy-Wilson Inc.'s senior unsecured notes to BB- from BB, with the recovery rating remaining 5.

S&P noted that Kennedy-Wilson’s share of EBITDA generated from gains on asset sales plummeted over the past year, leading to elevated leverage.

“We don't typically consider gains on asset sales as part of EBITDA for real estate companies, but consider it a core part of Kennedy-Wilson's business strategy supported by its sizable asset management platform and the recurring and material volume of these gains. This source of EBITDA generation is inherently more volatile than EBITDA generated from rental revenue, which accounts for the majority of EBITDA for its real estate peers,” the agency said in a statement.

For the company’s consolidated portfolio, EBITDA generated from gains on asset sales came in at $46.5 million over the past 12 months compared with more than $700 million for the previous 12 months driving adjusted debt to EBITDA to 17.1x at Sept. 30 compared with 6.9x the year before.

The outlook is negative.

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