Complete Property Market Updates of Singapore

March 30, 2008

Despite downgrade, Allco Reit gets some relief

Filed under: General — Propertymarketupdates @ 3:04 pm

It manages to secure extension of its debt repayment deadline.

Allco Commercial Real Estate Investment Trust (Allco Reit) – which went to court to fend off a ratings downgrade – has succeeded in obtaining an extension of its debt repayment obligations, despite the ratings cut.

The trust had sought to obtain an injunction to prevent Moody’s Investors Service from downgrading its credit rating, as it feared the revision would hurt its efforts to refinance some $620S million in debt.

But the injunction was set aside this week and Moody’s went ahead to lower Allco Reit’s corporate family rating to ‘Ba2′ from ‘Ba1′ – and retained the ratings on review for further possible downgrade.

The trust, however, still managed to obtain some relief on its debt refinancing obligations.

Allco (Singapore) Limited, the manager of Allco Reit, announced yesterday that the trust had received in-principle approval for the extension of the maturity date of $550S million of debt from July 31, 2008 to Dec 31, 2009.

Allco Singapore said that it is reviewing the terms and conditions of the extension and will soon execute binding documentation.

It expects to repay the remaining $70S million of debt, due to mature on Nov 22, 2008, with the proceeds Allco Reit is likely to receive from Allco Wholesale Property Fund – which has interests in several properties in Sydney.

Allco Reit had announced earlier this month that it is considering selling the assets of Allco Wholesale Property Fund – and intends to return the net proceeds to unitholders in the third quarter of this year.

It was this proposed sale of its Australian assets that sparked off the ratings downgrade in the first place.

Moody’s ratings review panel had decided to meet, upon Allco Reit announcing its intention to divest its Australian assets – properties valued at $483A million ($603S.3 million). The panel agreed to downgrade the trust’s credit rating, on the basis that the sale would affect its credit standing.

Allco Reit felt the agency’s move was ‘precipitous and wholly unwarranted’, as it had not yet sold the assets but was only considering doing so. It sought an injunction to prevent Moody’s from issuing the downgrade, as it felt that would hurt its attempts to obtain credit approvals from bankers for the refinancing of the $620S million in debt.

But Moody’s battled the injunction, arguing that it undermined the agency’s very purpose and integrity and that it would prevent the public from accurately judging Moody’s assessment of Allco Reit’s credit worthiness.

The High Court set aside the injunction on Tuesday, and Moody’s issued its downgrade.

Source : Business Times – 21 Mar 2008

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