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I AGREE
15 Feb 2018
Approximately $1.4 billion in securities affected
New York, February 15, 2018 -- Moody's Investors Service ("Moody's") downgraded all of CBL & Associates
Properties, Inc. (CBL)'s ratings, including the
ratings of its operating subsidiary, CBL & Associates Limited
Partnership's senior unsecured debt rating to Ba1 from Baa3 and
its senior unsecured debt shelf to (P)Ba1 from (P)Baa3. In the
same rating action, Moody's withdrew CBL's Baa3 issuer
rating. The rating outlook remains negative.
The following ratings were downgraded:
CBL & Associates Properties, Inc.:
--Senior unsecured debt shelf to (P)Ba1 from (P)Baa3
--Preferred shelf to (P)Ba2 from (P)Ba1
CBL & Associates Limited Partnership:
--Senior unsecured debt rating to Ba1 from Baa3
--Senior unsecured debt shelf to (P)Ba1 from (P)Baa3
The following rating was withdrawn:
CBL & Associates Properties, Inc.:
--Long-term issuer rating at Baa3
RATINGS RATIONALE
The rating downgrade reflects CBL's weaker-than-expected
operating performance in recent quarters and its lowered expectations
for 2018. Moody's expects CBL's already high leverage
to rise further as a result of continued pressure on earnings amidst an
increasingly challenging retail environment. Moreover, the
REIT has significant upcoming debt maturities as $761 million comes
due by 2019 and an additional $372 million in 2020 (including extension
options and unconsolidated debt).
CBL reported that same-center NOI declined 2.9% for
full year 2017 and 6.7% for fourth-quarter 2017 versus
the prior year periods. Moreover, CBL projected same-center
NOI to decline between 6.75% and 5.25% in
2018. Fourth quarter 2017 results and the 2018 outlook reflect
the impact of significant retailer bankruptcies, store closings
and rent adjustments, which mostly occurred in the second half of
2017 and for which CBL will experience the full-year impact in
2018. The REIT has been experiencing pressure on rents, with
rent spreads at stabilized malls down 9.8% including an
11.1% decline on renewals for the fourth quarter 2017.
Moody's anticipates that CBL's Net debt/EBITDA will increase
due to its projected earnings decline.
CBL had $94 million drawn on its $1.1 billion unsecured
credit facility as of year-end 2017. However, only
$575 million was available for the REIT to borrow because of a
debt covenant that limits its ability to access the full amount under
the lines of credit based on the ratio of unsecured indebtedness to unencumbered
asset value. Moody's views CBL's liquidity as modest
as the REIT will be reliant on external capital and asset sales over the
next few years as it seeks to refinance upcoming debt maturities.
Moody's notes that the REIT continues to generate positive free cash flow,
which it can use to repay debt and for capital expenditures.
The negative rating outlook continues to reflect operating pressures that
could be exacerbated by the challenging retail environment, especially
for mall operators such as CBL with portfolios that have average sales
per square foot under $400. For the year ended December
31, 2017, CBL's stabilized mall same-center sales
per square foot was $372, which declined from $379
in the prior year. Moreover, CBL has a sizable exposure to
distressed retailers including Sears and Bon-Ton. Moody's
expects CBL's operating performance to be more susceptible than
other retail REIT peers to further deterioration, as its lower productivity
malls face higher risk of potential tenant bankruptcies and store closings.
Its liquidity position could be further pressured as the pool of properties
needing re-development spend expands.
A return to a stable outlook would require the stabilization of CBL's
NOI. A downgrade would result from a further downward revision
of its earnings projection. Moody's believes an upgrade is
unlikely in the near to medium term given the negative outlook.
However, longer term, a positive rating action would require
CBL's sustained improving operating performance, including
improving trends in portfolio occupancy, same-store rent
growth, unit coverage trends, as well as Net debt/EBITDA that
is commensurate with higher rated retail peers.
The principal methodology used in these ratings was Global Rating Methodology
for REITs and Other Commercial Property Firms published in July 2010.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
CBL & Associates Properties, Inc. [NYSE: CBL]
is a retail REIT headquartered in Chattanooga, Tennessee.
CBL owns, holds interests in or manages 119 properties, including
76 regional malls/open-air centers. The properties are located
in 27 states as of December 31, 2017.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
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or category/class of debt or pursuant to a program for which the ratings
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rating practices. For ratings issued on a support provider,
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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.
Thuy Nguyen
Vice President - Senior Analyst
Commercial Real Estate 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
Nick Levidy
MD - Structured Finance
Commercial Real Estate 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.
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