Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's affirms QualityTech, L.P.'s B1 debt rating; outlook revised to positive

16 Sep 2019

New York, September 16, 2019 -- Moody's Investors Service ("Moody's") has affirmed QualityTech, L.P.'s B1 senior unsecured debt rating. In the same rating action, Moody's assigned a B1 corporate family rating to QualityTech, L.P. QualityTech, L.P. is the operating partnership of QTS Realty Trust, Inc. (collectively referred to herein as "QTS"). The outlook was revised to positive from stable, which reflects the REIT's improved earnings quality and higher EBITDA margin resulting from its successful strategic shift to exit non-core cloud and managed services products to focus on hybrid colocation and select hyperscale opportunities. The positive rating outlook also incorporates the continued demand for data center assets.

The following rating was affirmed:

QualityTech, L.P.

Senior unsecured debt at B1

The following ratings were assigned:

QualityTech, L.P.

Corporate Family Rating at B1

Speculative Grade Liquidity Rating at SGL-2

The following rating was withdrawn:

QTS Realty Trust, Inc.

Corporate Family Rating at B1

Outlook Actions:

QualityTech, L.P.

Outlook revised to Positive from Stable

QTS Realty Trust, Inc.

Outlook Withdrawn from Stable

RATINGS RATIONALE

QTS's profitability has improved following the company's 2018 strategic shift to exit non-core cloud and managed services products, which include dedicated cloud, specific managed services, and a portion of colocation attached to non-core customers. Cloud and managed services accounted for 14% of QTS's annualized rent for year-end December 31, 2017. The shift sharpened the REIT's focus on hybrid colocation and select hyperscale opportunities, which should continue to drive margin improvement, enhance earnings quality, and reduce cash flow volatility driven by the generally longer-duration wholesale contracts with high quality tenants compared to cloud and managed services contracts. EBITDA margin improved to 47.9% for Q2 2019, up from 46.7% for 2017, although still below Moody's data center rated peers.

Historically, QTS's exposure to the cloud and managed services products was vulnerable to competitive pricing dynamics and weaker earnings quality. The competitive pricing is a result of low barriers to entry that draw many participants, while the weaker earnings quality stems from shorter lease terms and tenants of moderate credit standing.

QTS has a granular customer base with limited customer concentration in its portfolio. As of June 30, 2019, only five of its more than 1,100 customers individually accounted for more than 3% of the REIT's monthly recurring revenue ("MRR"), with the largest customer accounting for approximately 11.9% of its MRR and the next largest customer accounting for only 5.9% of its MRR. Rental Churn (MRR lost in the period to a customer intending to fully exit the QTS platform in the near term compared to total MRR at the beginning of the period) was 1.0% for the three months ended June 30, 2019. Rental Churn was 2.3% for the six months ended June 30, 2019.

QTS's credit profile also benefits from solid and sustained demand for data center space and its growing track record as a reliable data center landlord. However, the REIT's rating is constrained by its high leverage, material asset concentration, small scale, a large percentage of near-term lease expiration and the growing supply pressures in certain US markets mean that QTS's ability to grow margins quickly will be constrained.

QTS's $423 million in two separate preferred issuances over the course of 2018 have put pressure on its leverage (Moody's applies a 75% debt treatment to preferred stock). Its net debt to EBITDA increased to 8.1x at Q2 2019, compared to 6.3x at the end of 2017. Positively, QTS's total debt levels (ex-preferred equity) have grown only modestly, and given visibility into the REIT's "booked not billed" pipeline, Moody's expects QTS's leverage to improve, approaching 7x in the next twelve to eighteen months, which supports the positive outlook.

QTS is a relatively small player in the broader REIT sector, particularly compared to Moody's rated data center REITs, with a portfolio comprising of 26 data centers totaling $3.6 billion of gross book value. QTS's two largest properties, Atlanta-Metro and Atlanta-Suwanee, GA data centers contributed 31.2% and 15.7% of the first six months of 2019 NOI, respectively. However, the REIT has gradually reduced the exposure as it continues to broaden the asset base.

QTS's SGL-2 rating is supported by its cash flow generation, ample revolver availability, and a minimal near-term maturity schedule, which should lend flexibility to support growth. At June 30, 2019, QTS's revolving credit facility had $564 million available on its $820 million capacity. The revolver expires in 2022 and contains a one-year extension option. The REIT has an additional $10.6 million in cash and $147 million in undrawn forward equity proceeds as of June 30, 2019. However, the REITs' capex is sizable, between $450 million and $500 million for 2019, which was partially funded through its common equity raise in Q1 2019. Nonetheless, the REIT's financial flexibility is enhanced by its sizable unencumbered asset pool, which represents 93.7% of gross assets as of Q2 2019.

As many data center tenants incorporate environmental impact assessments in their leasing decisions, QTS has responded by investing in ESG projects such as procurement of power from renewable sources, conserve water and its commitment to achieve LEED certifications at 90% of its properties by 2025.

An upgrade would be predicated on QTS's prudent growth strategy while maintaining ample liquidity and improving profitability margins. The ratings could be upgraded if the REIT's net debt (including preferred stock) to EBITDA approaching 7.0x, EBITDA margins are above 50% and fixed charge coverage is above 3.0x.

Given the positive outlook, it is unlikely that QTS's ratings would be downgraded. However, if the REIT experiences higher than expected churn and customer defections. The rating would also be lowered if QTS's financial performance were to deteriorate such that net debt (including preferred stock) to EBITDA is sustained above 8.0x, EBITDA margins are approaching 45% or fixed charge coverage is approaching 2.5x. Material increase in its development exposure without adequate preleasing could also lead to negative rating pressure.

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.

QTS Realty Trust, Inc., (NYSE: QTS) headquartered in Overland Park, Kansas, USA is the REIT parent of QualityTech, LP. QTS is a provider of data center solutions across a diverse footprint spanning more than 6 million square feet of owned mega scale data center space. At June 30, 2019, QTS owns, operates or manages 26 data centers and supports more than 1,100 customers primarily in North America and Europe.

REGULATORY DISCLOSURES

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.

With reference to the withdrawal of the ratings of QTS Realty Trust, Inc.: The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

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.

Thuy Nguyen
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Philip Kibel
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

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 rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​
Moodys.com