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Rating Action:

Moody's affirms Mapletree Commercial Trust's Baa1 ratings; outlook stable

27 Nov 2018

Singapore, November 27, 2018 -- Moody's Investors Service has affirmed Mapletree Commercial Trust's (MCT) Baa1 issuer rating.

At the same time, Moody's has affirmed the provisional (P)Baa1 senior unsecured ratings on the medium-term note programs of MCT and Mapletree Commercial Trust Treasury Company Pte. Ltd.

Moody's has also affirmed the Baa1 ratings on the senior unsecured notes drawn down from the programs under Mapletree Commercial Trust Treasury.

Mapletree Commercial Trust Treasury is a wholly-owned subsidiary of MCT, and its programs and notes are guaranteed by MCT.

The outlook on all ratings is stable.

RATINGS RATIONALE

"The ratings affirmation reflects our expectations that MCT's moderate credit metrics will remain stable over the next 12-18 months, supported by recurring income from its portfolio of good quality commercial properties in Singapore," says Rachel Chua, a Moody's Assistant Vice President and Analyst.

Moody's estimates that MCT's adjusted net debt/EBITDA will stay at 7.5x and its adjusted debt/deposited assets will be around 35% for the fiscal years ending 31 March 2019 and 2020.

MCT's Baa1 ratings also remain supported by the trust's improved portfolio diversification and earnings growth, following the acquisition of Mapletree Business City I (MBC I) in 2016, track record of prudent financial management and strong financial flexibility, as well as support from its financially strong sponsor, Mapletree Investments Pte. Ltd.

At the same time, the ratings remain constrained by MCT's exposure to lease expiry risk, reliance on VivoCity for over 45% of its net property income, as well as the inherent liquidity risks associated with Singapore's real estate investment trusts, as a result of their high dividend payout ratios and minimum cash balances.

MCT has the right of first refusal over its sponsor's income-producing properties in Singapore that are primarily used for office and retail purposes. The largest property in the pipeline is MBC II, a business park that is adjacent to MBC I, which MCT owns. MCT is not contractually obliged to acquire MBC II.

Moody's will assess the credit implications of such an acquisition, based on several factors, including the funding structure, lease expiry profile, occupancy and rental rates and tenant quality.

"We expect MCT will maintain its prudent financial policies such that it funds such acquisitions with a balanced mix of debt and equity," adds Chua, who is also Moody's Lead Analyst for MCT.

MCT has a healthy liquidity profile. At 30 September 2018, the trust had no debt maturing within the next 12 months. Its next maturity is in late 2019, when its SGD50 million of medium-term notes come due.

In addition, MCT had committed and undrawn bank facilities of SGD232 million and a cash balance of SGD47 million at 30 September 2018.

The ratings outlook is stable, reflecting Moody's expectation that MCT will continue to generate stable cash flow from its current portfolio, driven by steady occupancy levels and manageable lease expiries.

Upward ratings pressure will emerge if MCT's financial profile improves, such that its adjusted debt/total deposited assets improves to below 35%, adjusted net debt/EBITDA falls below 6.0x, and adjusted EBITDA/interest coverage improves to above 4.0x on a sustained basis.

Downgrade ratings pressure will emerge if: (1) the operating environment deteriorates, leading to higher vacancy levels and declines in MCT's operating cash flow; (2) the trust does not comply with the regulatory debt/asset limit of 45%; or (3) MCT's financial metrics weaken, with adjusted net debt/EBITDA above 8.0x-8.5x or adjusted EBITDA/interest coverage below 3.0x.

The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in September 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Mapletree Commercial Trust (MCT) listed on the Singapore Stock Exchange on 27 April 2011. At 30 September 2018, the trust had a portfolio of five properties in Singapore — across the retail, office and business park segments — with a combined appraised value of SGD6.7 billion.

The trust's sponsor, Mapletree Investments Pte. Ltd, is a wholly owned subsidiary of Temasek Holdings (Private) Limited (Aaa stable), which is in turn wholly owned by the Government of Singapore (Aaa stable). At 7 November 2018, Mapletree Investments held a 34.1% stake in MCT.

MCT is managed by Mapletree Commercial Trust Management Ltd., while its properties are managed by Mapletree Commercial Property Management Pte. Ltd. Both management companies are wholly owned subsidiaries of Mapletree Investments.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rachel Chua
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

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​
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