S&P trims KKR Real Estate

S&P said it lowered its ratings for KKR Real Estate Finance Trust Inc. and its senior secured debt ratings to B+ from BB-.

“The downgrade reflects our expectation that KREF will operate with leverage of 5x-6.5x. Debt to ATE rose to 5.2x as of March 31, 2023, from 5x as of year-end 2022 and 4.3x as of March 31, 2022. Pro forma for its upcoming $144 million convertible maturity in May 2023, we expect leverage to be 5.1x-5.15x. Moreover, KREF is required to distribute at least 90% of taxable income annually as a REIT, limiting its ability to lower leverage through retained earnings growth,” the agency said in a statement.

The outlook is stable though in February the agency revised it to negative from stable. It did not provide any information on the changed outlook.

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