S&P: Starhill Global REIT's Proposed Senior Unsecured Notes Rated 'BBB+' And 'axA+'
The issue rating is the same as the corporate credit rating on SGREIT because the REIT's total secured debt is below our notching threshold of 20% of total assets. Moreover, the contribution of net operating income from encumbered assets is less than our notching threshold of 50% of total net operating income. SGREIT expects to use about S$55 million of the note proceeds to refinance existing debt. The company expects to use the rest of the funds (S$15 million) for capital expenditure including asset-enhancement initiatives, and for working capital purposes.
The rating on SGREIT reflects the trust's high-quality asset portfolio, consistently high occupancy rates, and stable cash flows. Tempering these strengths are SGREIT's moderate single asset and single tenant concentration risks. We regard the incremental debt of about S$10 million from the proposed issue as credit neutral. We expect the company's debt-to-debt plus equity ratio to average about 35% through 2018.
The stable outlook on SGREIT reflects our expectation that the REIT would maintain its debt/debt plus equity at around 35% over the next 24 months. It also reflects our expectation that the REIT would generate stable cash flows over the next 24 months, while maintaining a prudent financial policy. Nevertheless, SGREIT's buffer for more debt has reduced substantially following debt-funded asset acquisitions over the past 18 months.