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Rating Action:

Moody's affirms Mapletree Logistics Trust's Baa2 ratings on acquisition of properties in China, Vietnam and Japan; outlook stable

25 Nov 2021

Singapore, November 25, 2021 -- Moody's Investors Service has affirmed the Baa2 issuer rating of Mapletree Logistics Trust (MLT).

At the same time, Moody's has affirmed the (P)Baa2 backed senior unsecured ratings on the medium-term note programs of MapletreeLog Treasury Company Pte. Ltd. (MTC) and MapletreeLog Treasury Company (HKSAR) Ltd. (MTCHK). Moody's has also affirmed the Baa2 ratings on the backed senior unsecured notes drawn down from the program under MTC. The notes and programs are guaranteed by MLT.

MTCHK is a wholly-owned subsidiary of MTC, which is in turn a wholly-owned subsidiary of MLT.

The outlook on all ratings remains stable.

The affirmation follows MLT's announcement on 22 November 2021 that it plans to acquire 13 logistics properties in China, three in Vietnam and one in Japan for a total acquisition cost of approximately SGD1.4 billion.

The transaction is subject to certain conditions, including the receipt of regulatory and unit-holder approvals.

"The ratings affirmation reflects our expectation that MLT's credit metrics after the transactions will remain within the parameters of its Baa2 ratings -- with net debt/EBITDA below 9.5x on a normalized basis -- because the trust plans to fund the acquisition with a larger proportion of equity than debt," says Junling Tan, a Moody's Analyst.

RATINGS RATIONALE

MLT plans to raise SGD900 million of equity and the remaining balances to be funded by unsecured debt facilities. The equity fund raising, excluding its sponsor's undertaking, is underwritten by banks.

Post transaction, Moody's estimates that the proportion of revenue from developing markets will increase to around 34% for the financial year ending 31 March 2023 from 29% for the financial year ending 31 March 2022.

While MLT will immediately benefit from the recurring cash flow available from the new properties, the less favorable supply-demand dynamics of non-tier-1 cities in China and lower occupancy rates of the properties acquired exposes the trust to higher volatility. However, such increase in voltaility will be partly mitgated by the trust's strong execution track record. As of 11 November 2021, the China, Vietnam and Japan properties had a committed occupancy rate of 89.1%, 100% and 82.5% respectively; and weighted average lease expiry of 2.7 years, 4.0 years and 1.7 years, respectively.

MLT's Baa2 rating continues to reflect the trust's (1) diversified portfolio of logistics assets across nine markets within Asia Pacific; (2) stable and recurring rental income from its properties which will support its healthy credit metrics over the next 12-18 months; (3) excellent liquidity over the next 12-18 months; and (4) ownership by a financially strong sponsor, Mapletree Investments Pte. Ltd. (Mapletree Investments), which means that the trust can leverage its sponsor's expertise, track record and strong network of relationship banks.

The stable outlook reflects Moody's expectation that MLT's credit profile will remain resilient, as the increased demand for logistics and warehouse spaces driven by third-party logistics, e-commerce and pharmaceutical companies will support MLT's properties occupancy rates and rental income.

MLT has excellent liquidity over the next 18 months. As of 30 September 2021, the trust had cash and cash equivalents of SGD275 million and undrawn long-term committed credit facilities of around SGD674 million. These are sufficient to cover the trust's upcoming debt maturities of around SGD671 million over next 18 months. MLT has also raised perpetual securities of SGD400 million in October 2021 to refinance its perpetual securities of SGD250 million, which has a reset date in November 2021. The trust's ability to refinance its maturities ahead of time highlights its good funding access and established banking relationships.

In terms of environmental, social and governance (ESG) factors, Moody's has considered MLT's governance risk stemming from related-party transactions between the trust and its sponsor, Mapletree Investments. This risk is mitigated by the regulatory oversight provided by the Monetary Authority of Singapore and exercised through the board, which mostly consists of independent directors. Furthermore, there is an alignment of interest between MLT and its sponsor because the latter has maintained at least a 30% stake in the trust since its listing.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

A rating upgrade would require an extended track record of improvement in the trust's financial profile while it pursues growth. Specific metrics indicative of an upgrade include MLT's debt/deposited assets within the gearing level of 40%, Moody's-adjusted net debt/ EBITDA below 7.5x-8.0x and Moody's-adjusted EBITDA/interest coverage above 3.5x.

Moody's could downgrade MLT's rating if the trust's occupancy rates, rental rates or profitability declines because of weakening market conditions; its operating risk is heightened because of increasing past-due rent or lengthened rent payment terms; or if the trust undertakes further debt-funded acquisitions, such that its leverage weakens further over the next 12-18 months or if it does not comply with the regulatory debt/asset limit of 50%. Specific metrics indicative of a downgrade include its Moody's-adjusted net debt/EBITDA exceeding 9.0x-9.5x and Moody's-adjusted EBITDA/interest coverage declining below 3.0x.

The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1272320. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Listed on the Singapore Exchange in July 2005, Mapletree Logistics Trust (MLT) has a diversified portfolio of 164 properties in Singapore, Hong Kong SAR, China, Japan, Australia, South Korea, China, Malaysia, Vietnam and India, with a total appraised value of SGD10.9billion as of 19 November 2021.

MLT's sponsor is Mapletree Investments Pte. Ltd., a wholly-owned subsidiary of Temasek Holdings (Private) Limited (Aaa stable), which in turn is an investment company owned by the Government of Singapore (Aaa stable).

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Junling Tan
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

Vikas Halan
Associate Managing Director
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.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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