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Rating Action:

Moody's upgrades Globalworth Real Estate Investments Limited's rating to Baa3 from Ba1; Outlook stable

12 Apr 2019

NOTE: On September 19, 2019, the press release was corrected as follows: The following was added to the beginning of the third paragraph of the REGULATORY DISCLOSURES section: “With reference to the withdrawal of the rating of Globalworth Real Estate Investments Limited: ” Revised release follows.

NOTE: On September 12, 2019, the press release was corrected as follows: The following sentence was added as the third paragraph of the REGULATORY DISCLOSURES section: “The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.” Revised release follows.

Frankfurt am Main, April 12, 2019 -- Moody's Investors Service ("Moody's") has today assigned a Baa3 long term issuer rating for Globalworth Real Estate Investments Limited (Globalworth). Concurrently, Moody's upgraded to Baa3 from Ba1 the rating on the outstanding €550 million senior unsecured notes due 2022 and €550 million euro medium term notes maturing 2025. The outlook has been changed to stable from positive.

Moody's has also withdrawn Globalworth's corporate family rating (CFR) of Ba1 following its upgrade to Baa3, as per the rating agency's practice for corporates with investment grade ratings. Please refer to the Moody's Investors Service's Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.

RATINGS RATIONALE

"The upgrade to Baa3 with a stable outlook reflects an improved business profile supported by Globalworth's successful expansion of its real estate operations into Poland (A2, Stable), a market benefitting from a positive economic environment and strong property market fundamentals. Overall the premium quality of its office portfolios in Poland and Romania continues attracting international blue chip tenants and provides for sustained robust operating performance in both geographies. Moreover the company is committed to maintain an equally strong financial profile in order to sustainably continue with its growth strategy, even in potentially more difficult times" says Ana Luz Silva, an Associate Vice President Analyst at Moody's and lead Analyst for Globalworth.

We also note positively that Globalworth benefits from a supportive shareholder base, with two well know industrial investors Growthpoint Properties Limited (Baa3 global scale, Aaa.za local scale) and Aroundtown (unrated), and at the same time a growing track record in accessing both debt and equity capital markets.

Globalworth's Baa3 long term issuer rating reflects (i) its leading position in the Polish and Romanian premium office markets, (ii) its strong tenant base, a fairly long weighted average lease term and high occupancy rate of its portfolio, (iii) solid credit metrics, as reflected by a Moody's debt/assets ratio of 45.2% per end of 2018, expected to further strengthen towards 43% in 2019, notwithstanding continued growth plans and (iv) its good liquidity supported by an almost fully unencumbered asset base.

Partly offsetting these strengths are (i) a continuing fast paced growth through acquisitions and developments which will continue in the next 1-2 years introducing execution risk, (ii) short track record as a leading landlord, (iii) still high exposure to the weaker Romania (Baa3, Stable) representing 49% of standing gross asset value, (iv) relatively large, but controlled development program and (v) some debt maturities concentration in 2022 and 2025, which will require refinancing well in advance.

Finally we note that the focus of its operations in Poland and Romania, entail some tail risk with respect to valuation and access to capital, as both are relatively immature real estate markets compared other core European markets and thus more exposed to volatility in case of a downturn.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook reflects Moody's expectation that the company will continue featuring a solid business profile supported by a balanced growth strategy. The outlook also reflects an expected unchanged favorable operating environment in both Poland and Romania over the next 12 to 18 months, as well as Moody's expectation that the company will maintain credit metrics commensurate with a disciplined financial policy committed to an investment grade rating, such as its net LTV target of below 40%.

FACTORS THAT COULD LEAD TO AN UPGRADE

Growing track record in managing a further increasing portfolio, whilst maintaining a conservative balance sheet

Further building of a track record in accessing to all forms of debt and equity capital

Moody's-adjusted gross debt/total assets below 35%

Moody's-adjusted fixed charge coverage ratio sustained above 4.0x

Maintaining strong liquidity and a long-dated well-staggered debt maturity profile with a record of successfully addressing any refinance needs well ahead of their maturity

Sustained robust unencumbered assets ratio with high quality asset pool in strong jurisdictions

FACTORS THAT COULD LEAD TO A DOWNGRADE

Failure to continue growing its Poland property portfolio towards 60% gross asset value of the company within three years and to remain above that thereafter

Effective leverage sustained above 40% and thus outside its financial policy

Fixed charge cover below 3.0x on a sustained basis

Failure to address debt maturities well in advance

Increased execution risks amid a potentially more aggressive acquisition strategy or speculative development activities

Increase of its development pipeline towards 10%

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in September 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

As of year-end 2018, Globalworth owned a EUR2.4 billion standing property portfolio located in Romania (with a concentration in Bucharest's central business district area) and Poland, which had EUR159.5 million contracted annual rental income.

The company is listed on the London AIM market, with market capitalization of ca. EUR1.6 billion as of 12 April 2019.

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.

With reference to the withdrawal of the rating of Globalworth Real Estate Investments Limited: The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

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.

Ana Luz Silva Robles
Asst Vice President - Analyst
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.
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