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Rating Action:

Moody's places Unibail Rodamco Westfield ratings on review for downgrade

12 Nov 2020

Frankfurt am Main, November 12, 2020 -- Moody's Investors Service (Moody's) today placed Unibail-Rodamco-Westfield SE's (URW) ratings on review for downgrade, including its Baa1 issuer and senior unsecured ratings as well as the Baa3 junior subordinated ratings. The outlook has changed to ratings under review from stable. The review action reflects the failed capital raise that was anticipated to support credit metrics in a period of operational challenges.

A full list of all affected ratings can be found at the end of this press release.

RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

As part of its RESET plan, URW intended to raise equity capital, cut dividends and reduce capital spending in an effort to sustainably strengthen its balance sheet by reducing debt. In an extraordinary general meeting on 10 November 2020, the resolution to raise equity failed to receive sufficient support from shareholders. Our rating assessment expected the capital raise to be approved, hence leverage metrics will be weaker than expected unless alternative deleveraging methods will be executed. On a pro-forma basis based on H1 2020, the capital raise would have resulted in a reduction of Moody's-adjusted debt/assets by around 5.4%, and a decline of net debt/EBITDA by around 1.6x. Without further measures implemented, our leverage forecasts exceed the level commensurate with its current Baa1 rating level. Furthermore, and independent of the impact on credit metrics, the failed capital raise highlights weak access to equity capital and suggests a higher leverage tolerance for the company at this point.

The review for downgrade will consider any actionable alternatives the company intends to pursue to delever the company that matches the extent of the failed capital raise, attached execution risks and timeframe those alternative measures contain, and to what extend leverage tolerance has changed for the company in the next year or two.

Moody's understands the company still remains committed to strengthen its capital structure through all measures under the RESET plan other than the equity raise, but no updated plan to further delever the company has been presented so far. A consortium of investors has brought forward an alternative plan, suggesting to sell its US business, which Moody's believes would contain a very high degree of execution risk. The additional request to add three members to URW's board of directors was approved by the general meeting.

Moody's notes that the operating environment has weakened as full or partial lockdowns have been imposed in a number of European countries. While end of October the largest part of URWs centres were open, most non-essential shops in Europe are closed or will likely suffer from strongly reduced footfall and sales in November. Moody's expects a weak operating performance in November, triggering an additional amount of tenant insolvencies, especially if the crucial Christmas sales period is impacted by the restrictions and the reduced footfall.

Despite the weaker operating environment, recent news around a vaccine against COVID-19 with a high efficacy rate becoming potentially available in the short term reduces the risk of a prolonged period of business restrictions throughout the largest part of 2021. If a vaccine was found in the next months, it will also help to execute potential asset sales and provides retailers with a perspective on a potential return to normal for their store network.

LIQUIDITY

URW retains a solid liquidity position. In addition to €3.2 billion of cash on balance sheet as of September 2020, the company had access to more than €9billion of undrawn credit facilities (RCF). Even when excluding expiring RCFs from available sources, available liquidity including expected FFO exceeds all cash outflows including CAPEX and dividends for more than the next 18 months. The company also still has substantial buffers under its standard covenants.

An upgrade is unlikely at this point given the review for downgrade.

Moody's will likely downgrade the ratings unless URW shows a credible alternative for delevering the company with limited execution risks in a timely manner to a leverage level in line with our previous expectations that included a capital raise. A changed leverage tolerance and target can also lead to a downgrade of the ratings. Rating pressure can also stem from larger than anticipated pressure on operating performance through retailer distress or lack of consumer spending in malls. Other factors that could lead to a downgrade include Moody's-adjusted debt/asset failing to reduce below 50%, net debt/EBITDA fails to remain below 12x, or fixed charge cover sustains below 3.25x in 2021.

LIST OF AFFECTED RATINGS:

..Issuer: Unibail-Rodamco-Westfield SE

Placed On Review for Downgrade:

.... LT Issuer Rating, currently Baa1

....BACKED Junior Subordinate Regular Bond/Debenture, currently Baa3

....BACKED Senior Unsecured Medium-Term Note Program, currently (P)Baa1

....BACKED Senior Unsecured Regular Bond/Debenture, currently Baa1

Outlook Actions:

....Outlook, Changed To Ratings Under Review From Stable

..Issuer: Rodamco Sverige AB

Placed On Review for Downgrade:

....BACKED Senior Unsecured Medium-Term Note Program, currently (P)Baa1

Outlook Actions:

....No Outlook

..Issuer: WEA Finance LLC

Placed On Review for Downgrade:

....BACKED Senior Unsecured Regular Bond/Debenture, currently Baa1

Outlook Actions:

....Outlook, Changed To Ratings Under Review From Stable

..Issuer: WFD Trust

Placed On Review for Downgrade:

....BACKED Senior Unsecured Regular Bond/Debenture, currently Baa1

Outlook Actions:

....Outlook, Changed To Ratings Under Review From Stable

PRINCIPAL METHODOLOGY

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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

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.

Oliver Schmitt
VP - Senior Credit Officer
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Anke Rindermann
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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