Moody's Investors Service has assigned a Baa1 foreign currency issuer rating to Mapletree Pan Asia Commercial Trust (MPACT) N2IU .
This reflects the trust’s strong operating performance through the years from a portfolio of good-quality assets in Singapore and North Asia, as well as a track record of prudent financial management as demonstrated by its funding of acquisitions with a balanced mix of debt and equity, Moody’s says in a statement.
It adds that MPACT's credit quality is supported by its financially strong sponsor, Mapletree Investments. The trust can leverage its sponsor's operational track record, expertise and strong network of relationship banks.
MPACT's leverage, as measured by net debt/ebitda, will remain high at 9.8x-10.2x in the fiscal year ending March. However, Moody's expects leverage to improve to levels appropriate for MPACT's Baa1 rating by FY2024, as its earnings recover gradually over the next 12-18 months following the relaxation of Covid-19 policies and lower rebates.
Moody’s also highlights MPACT's excellent liquidity. As at Dec 31, the trust had debt maturities of $1.3 billion through March 2024, compared with $147 million of unrestricted cash and $561 million of long-term committed facilities. Additionally, MPACT obtained around $600 million of bank loans in January.
MPACT’s rating could be upgraded if the trust balances its growth while improving its leverage, such that its net debt/ebitda remains below 8.0x on a sustained basis.
See also: Changes in ICR, leverage to come into effect immediately, with additional disclosures in March
On the other hand, Moody's could downgrade the rating if MPACT's operating environment deteriorates, leading to higher vacancy levels and declining operating cash flow; or if the trust's credit metrics do not recover to a level more appropriate for its rating.
Specific credit metrics that Moody's would consider for a downgrade include net debt/ebitda remaining above 9.0x-9.5x and ebitda/interest expense falling below 3.0x.
Units in MPACT closed 2 cents lower or 1.12% down on Feb 9 at $1.76.
