Hong Kong, July 02, 2020 -- Moody's Investors Service has confirmed GLP Pte. Ltd.'s
Baa3 issuer and senior unsecured debt ratings, as well as the provisional
(P)Baa3 senior unsecured rating of its MTN program.
The outlook has been changed to negative from ratings under review.
This rating action concludes the review for downgrade initiated on 24
March 2020.
RATING RATIONALE
"The rating confirmation mainly reflects our expectation that GLP's
financial leverage will improve materially over the next 12 months from
the current high level, driven by large-scale monetization
of assets from balance sheet into its fund management platform,"
says Stephanie Lau, a Moody's Vice President and Senior Analyst.
Moody's expects GLP's adjusted net debt/EBITDA and EBITDA/interest
(before JV adjustments and monetized disposal gains) to improve to 7.5x-9.0x
and 2.0x-2.6x over the next 12-18 months,
from 10.3x and 2.3x for the 12 months to March 2020.
These ratios will appropriately position the company in the Baa3 rating
category.
This improvement will come despite its sizable capital spending and acquisition
of a stake in Li & Fung Limited (Baa3 negative) and Goodman Group's
(Baa1 stable) Central and Eastern European assets, and will be mainly
driven by large-scale monetization of assets from balance sheet
into its fund management platform with gross proceeds amounting to at
least $10 billion during H2 2020 and 2021. This approach
also demonstrates the company's strong commitment to deleveraging.
Moody's expectation is supported by GLP's track record of
raising capital through its fund management platform and syndication of
stakes in assets, the resilience of industrial assets despite the
challenging macro conditions, its long-term relationships
with established capital partners, and the flexibility to lower
capex spending in China. According to GLP, the company had
uncalled committed third-party equity of $6.9 billion
as of May 2020.
Moody's also expects the impact of coronavirus-related disruptions
and global recession to have a manageable impact on its earnings in the
next 12-18 months. The company has a diversified and broad
customer base, which has helped to support its relatively stable
lease ratios.
"That said, the negative outlook reflects a degree of uncertainty
over the pace and size of the asset monetization plans, which are
subject to regulatory approvals and administrative processes,"
adds Lau.
GLP's Baa3 ratings continue to reflect its (1) large portfolio of
modern logistics facilities; (2) global leading positions in Japan
(A1 stable) and China (A1 stable); (3) stable and recurring income
streams from rental and fund management fees; and (4) experienced
management team with a track record of asset syndication.
On the other hand, the ratings are constrained by GLP's (1) private
company status, which lowers its transparency; (2) execution
risks associated with its concentrated operations in China; and (3)
several large-scale acquisitions over the last few years,
which has led to a high debt leverage.
GLP's liquidity profile is moderate because of large maturing debt
and capital spending over the next 12 months. However, this
risk is mitigated by its good ability to raise funds through asset monetization
and bank borrowings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of GLP's issuer rating is unlikely in the near term,
given the negative outlook.
Nevertheless, the ratings outlook could return to stable if GLP
improves its debt leverage, such that: (1) adjusted net debt/EBITDA
(before JV adjustments and disposal gains) sustains below 9.0x;
and (2) EBITDA/interest coverage (before JV adjustments and disposal gains)
sustains above 2.0x-2.5x. GLP will also need
to show that it can sustain a good level of liquidity.
On the other hand, GLP's ratings would be downgraded if:
(1) there is a meaningful deterioration in EBITDA on a sustained basis;
or (2) it becomes unlikely that the company will deleverage because of
its pursuit of an aggressive investment strategy or a material deviation
from its asset monetization plan, such that adjusted net debt/EBITDA
(before JV adjustments and disposal gains) sustains above 9.0x
and EBITDA/interest coverage stays below 2.0x-2.5x.
A material weakening in GLP's liquidity position could also lead to a
downgrade.
The principal methodology used in these ratings was REITs and Other Commercial
Real Estate Firms published in September 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1095505.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
GLP is a leading global investment manager and business builder in logistics,
real estate, infrastructure, finance and related technologies.
It has operations in China (A1 stable), the US (Aaa stable),
Japan (A1 stable), Brazil (Ba2 stable), Europe and India (Baa3
negative).
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Stephanie Lau
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
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Chris Park
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
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China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
