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Rating Action:

Moody's downgrades CBL to Ba1; outlook remains negative

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The following rating was withdrawn: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 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.

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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