PrefBlog

RioCan REIT, proud issuer of REI.PR.C, has been confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed RioCan Real Estate Investment Trust’s (RioCan or the Trust) Senior Unsecured Debentures rating and Senior Unsecured Debentures, Series I rating at BBB (high) and its Preferred Trust Units rating at Pfd-3 (high), all with Stable trends. The confirmation of the ratings consider RioCan’s recently announced U.S. portfolio sale (the Transaction; see DBRS press release dated December 21, 2015) and plan to use proceeds from the Transaction to temporarily reduce debt.
…
Proceeds from the Transaction are expected to mainly pay down debt, which should temporarily improve key financial metrics to levels that are better placed within the BBB (high) rating category.

DBRS, however, expects the Trust will use this additional financial capacity to fund its substantial development pipeline with a higher proportion of debt than equity. As at Q4 2015, RioCan’s active development pipeline totalled approximately $1.6 billion in projected construction costs, including near-term leased projects of approximately $184 million before the end of 2016 (at RioCan’s share). DBRS believes the Trust will primarily use debt financing to fund these developments in the near to medium term, which should bring key financial metrics to lower levels, albeit still commensurate with the BBB (high) rating category.

DBRS believes a positive rating action could occur if RioCan increases the size of its portfolio, reduces its geographic concentration and improves EBITDA interest coverage (including capitalized interest) above 3.0 times (x), bringing the Trust to levels more consistent with the A (low) rating category. A negative rating action could occur if RioCan experiences any development mishaps, lower rents and/or tenant departures causing EBITDA interest coverage to fall below 2.3x on a sustained basis.

This entry was posted on Friday, April 8th, 2016 at 8:31 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.