New York, April 30, 2021 -- Moody's Investors Service, ("Moody's") has
placed VEREIT Operating Partnership, L.P.'s ("VEREIT")
Baa2 senior unsecured rating on review for upgrade, as Realty Income
Corporation (senior unsecured debt rating A3) will acquire VEREIT in an
all-stock transaction, including the assumption of debt.
The review for upgrade for the REIT is based on Moody's assessment of
the merger structure, and the expectation that VEREIT's existing
debts and bonds will be assumed by Realty Income.
Ratings placed on review for upgrade:
Issuer: VEREIT Operating Partnership, L.P.:
Backed Senior unsecured rating at Baa2;
Backed Senior unsecured shelf at (P)Baa2
Outlook Actions:
Issuer: VEREIT Operating Partnership, L.P.
- Outlook, Changed To Rating Under Review From Stable
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE
OF THE RATINGS
Realty Income Corporation ("Realty Income") announced on April
29 2021 that it had entered into a definitive merger agreement by which
Realty Income will acquire VEREIT in an all-stock transaction,
creating a combined company with an enterprise value of approximately
$50 billion. Under the terms of the agreement and subject
to shareholder approval, VEREIT shareholders will receive 0.705
shares of Realty Income stock for every share of VEREIT stock they own.
Immediately following the closing, the companies expect to effectuate
a taxable spin-off of substantially all of the office properties
of both companies into a new, self-managed, publicly
traded REIT ("SpinCo"). Following the merger and the
spin-off, Realty Income will continue as the surviving public
entity. Realty Income and former VEREIT shareholders are expected
to own approximately 70% and 30%, respectively,
of both Realty Income and SpinCo. The transaction is expected to
close in the fourth quarter of 2021 and is subject to the approval of
both Realty Income and VEREIT shareholders.
The review for upgrade for VEREIT is based on Moody's assessment of the
merger structure, and the expectation that VEREIT's existing debts
and bonds will be assumed by Realty Income. The merger is an overall
credit positive for VEREIT, including benefits of scale, increased
efficiencies and reduced costs of capital. If the merger closes
as proposed, VEREIT's senior unsecured ratings will be upgraded
to A3. VEREIT's outlook would be adjusted to reflect its capital
structure and portfolio mix if the transaction does not close.
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.
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_1263068.
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.
Juan Acosta
Asst Vice President - 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