Standard & Poor (S&P)’s Ratings Services has assigned its BBB- corporate credit rating to Equity One (EQY) and a BBB- rating to EQY's recently negotiated $340 million senior unsecured credit facility.
At the same time, the BBB- rating on $150 million of unsecured bonds assumed by EQY from IRT Property (IRT) is affirmed and removed from CreditWatch, where it was placed in October 29, 2002. The outlook for EQY is stable. The rating on IRT is withdrawn.
The rating actions follow the $720 million acquisition of IRT by EQY, which was not previously rated. The ratings acknowledge the newly combined company's stable grocery-anchored portfolio, moderate leverage, and manageable debt maturity schedule. These strengths are mitigated by a high level of encumbered assets, which tempers financial flexibility, and an acquisitive and somewhat untested management team that must manage a company that has grown its portfolio five-fold in an 18-month period.
S&P's initial concerns with the potential combination were related to the effective acquisition by an unrated and highly encumbered EQY, the complex pro forma ownership structure, and uncertainty surrounding the ultimate financing of the IRT equity componentof the transaction.
Following a detailed review of EQY management and the combined portfolio, as well as various financing scenarios, S&P concluded that the resulting capital structure and pro forma financial measures remain adequate for the current rating on the existing IRT bonds. EQY management appears committed to working secured debt levels down over time, and a recently negotiated unsecured revolver provides for enhanced financial flexibility.
The completed acquisition was ultimately financed moderately with roughly 45 percent equity and 55% debt, which includes $290 million of assumed IRT debt. The IRT equity component of the transaction was financed with 75 percent equity and 25 percent debt.
EQY is presently a consolidated subsidiary of Gazit-Globe, an Israel-based entity that is traded on the Tel-Aviv Stock Exchange. Gazit-Globe directly and indirectly controls about 47 percent of the combined company. With the acquisition of IRT, EQY's asset base doubles to $1.5 billion (cost basis) encompassing 180 properties and 18.4 million square feet. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
