[ET Net News Agency, 16 November 2017] Moody's Investors Service has changed to
negative from stable the outlook on Yuexiu Real Estate Investment Trust's (Yuexiu
REIT)(00405) Baa3 issuer rating.
Moody's has also changed to negative from stable the outlook on the provisional (P)Baa3
senior unsecured rating on Yuexiu REIT MTN Company Limited's MTN program and the Baa3
senior unsecured rating on the guaranteed medium term notes issued under the MTN program.
At the same time, Moody's has affirmed the above mentioned ratings.
The change of outlook follows Yuexiu REIT's announcement on 14 November 2017 that it
will acquire a 67% interest in a commercial complex in Wuhan from its parent company,
Yuexiu Property Company Limited (Baa3 negative), for a total consideration of RMB2.28
billion. The transaction is subject to its unit holders' approval.
The acquisition will be funded by a new bank loan of up to RMB1.22 billion and the rest
by a deferred payment to Yuexiu Property within one year of the completion of the
transaction.
"The negative outlook reflects the consideration that Yuexiu REIT's acquisition of the
commercial complex in Wuhan will result in debt leverage levels higher than that expected
for its Baa3 issuer rating," said Franco Leung, a Moody's Vice President and Senior Credit
Officer.
Moody's expects that the acquisition will increase debt leverage, as measured by
adjusted debt/EBITDA, to 10.7x-11.2x over the next 12-18 months from around 9.7x for the
12 months ended June 2017. Such high levels of debt leverage do not support its Baa3
issuer rating. (KL)