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28 Mar 2011
New York, March 28, 2011 -- Moody's Investors Service has assigned a first-time rating of (P)B1
to the proposed senior unsecured notes of Kennedy Wilson, Inc.,
a wholly-owned subsidiary of Kennedy-Wilson Holdings,
Inc. (NYSE: KW). Concurrently, Moody's
assigned a B1 corporate family rating to Kennedy Wilson. The rating
outlook is stable. This is the first time that Moody's has
rated Kennedy Wilson ("KW"), a real estate investment
and services firm with over $7 billion of assets under management.
The following ratings were assigned with a stable outlook:
Kennedy Wilson, Inc.
-- (P)B1 to the proposed senior unsecured notes
-- B1 corporate family rating
Kennedy Wilson proposes to issue $200 million in senior unsecured
notes due 2019, under Rules 144A / Reg. S. The notes
will rank pari passu with other unsecured debt. The notes have
various covenants including: limitations on the incurrence of additional
debt, guarantees, and restricted payments. Proceeds
from this transaction will be used to pay down approximately $78
million of corporate debt, with the remainder to be utilized for
future acquisitions and co-investments as well as for general corporate
The B1 senior unsecured debt and corporate family ratings reflect the
company's vertically-integrated operating platform,
which differentiates its investment proposition for investors, and
its long-standing network of relationships that generates investment
opportunities for the company and its capital partners. KW Investments
(approximately 70% of total revenues) co-invests in and
manages separate accounts and closed-end funds that acquire multifamily,
residential and office properties as well as loans secured by real estate.
KW Services (approximately 30% of total revenues) provides property
management, auction and conventional sales in addition to investment
management. These businesses are complementary to one another,
with KW Services often acting as a source for off-market real estate
investments while KW Investments has become a growing source of fee business
for KW Services.
These strengths are counterbalanced by KW's material geographic
concentration, with investments in California (42.1%),
Tokyo, Japan (31.5%) and Hawaii (15.8%).
In addition, KW's single largest investment, a multifamily
portfolio in Tokyo, Japan, represents 30% of the firm's
investment account. Also of concern is KW's complex ownership
structure, with over 70% of investments held in joint ventures
and funds. Furthermore, while the company holds relatively
moderate amounts of debt at the corporate level, there is high use
of off-balance sheet secured debt. Moody's notes that
the bulk of this off-balance sheet debt is in the form of mortgages,
which are non-recourse to the company and have relatively low average
loan-to-values (approximately 50%). Kennedy
Wilson is a small company with limited experience as a public company.
The company has grown significantly over the past two years with 90%
asset growth from 2008 to 2010. The rating takes into account continued
rapid growth over the near-term, while assuming that KW will
successfully scale its infrastructure to meet the needs of its capital
partners in KW Investments. Finally, Moody's note that
loss of key executives, and in particular William McMorrow,
CEO, could lead to loss of business as these individuals' deep and
long standing client relationships have been relied upon over the years
for deal flow.
The stable outlook reflects Moody's expectation that Kennedy Wilson
will scale its business successfully through the rapid growth in KW Investments,
while improving its credit metrics and maintaining adequate liquidity.
An upgrade would be precipitated by an increase in size and geographic
diversity, reduction in on- and pro-rata off-
balance sheet effective leverage below 65% and growth in income-generating
unencumbered assets. A downgrade would be prompted by loss of key
business relationships, investment underperformance which would
result in lower fixed charge coverage and effective leverage closer to
80% (on- and pro-rata off- balance sheet).
Kennedy-Wilson Holdings, Inc. is an international
real estate investment and services firm. The company has grown
from a real estate auction business into a vertically-integrated
estate operating company with over $7 billion of assets under management
totaling over 40 million square feet of properties throughout the United
States and Japan, including ownership in 11,971 multifamily
The principal methodology used in this rating was Global Rating Methodology
for REITs and Other Commercial Property Firms published in July 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service's information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Commercial Real Estate Finance
Moody's Investors Service
Commercial Real Estate Finance
Moody's Investors Service
Moody's Investors Service
Moody's rates Kennedy Wilson's proposed senior unsecured debt at (P)B1; outlook stable
250 Greenwich Street
New York, NY 10007
No Related Data.
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