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5 Asian RE companies in danger of losing Moody's investment-grade ratings

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5 Asian RE companies in danger of losing Moody's investment-grade ratings

Moody's included five Asian property companies in a list of 12 that face the risk of losing their investment-grade ratings if their credit profiles remain weaker than expected by 2017-end.

The companies — Wanda Commercial Properties (HK) Co. Ltd., Sino-Ocean Group Holdings Ltd., Yuexiu Property Co. Ltd., Ascott Residence Trust and Soilbuild Business Space REIT — have Baa3 ratings with a negative rating bias.

Giving its reasons, Moody's said that Sino-Ocean Group is one of eight Chinese companies that have weakened standalone credit profiles, while Yuexiu Property's negative outlook mainly reflected its parent company's weakened ability to provide support. Debt-funded acquisitions will put Ascott Residence Trust at risk, while Soilbuild Business Space's loss of rental income from its largest property, due to a defaulting tenant, has placed pressure on the company.

Kaven Tsang, a Moody's vice president and senior credit officer, said that the number of companies likely to lose their rating in 2017 has increased from four companies in 2015.

For the 12 companies to retain their investment-grade ratings, they should record their planned revenue and EBITDA growth and/or pay debt with operating cash flows or proceeds from asset disposals to reduce leverage, Moody's said.