Moody's affirmed Ascott Residence Trust's Baa3 issuer rating, with a stable outlook.
It comes after the real estate investment trust's proposed merger with Ascendas Hospitality Trust received over 99% of approval votes from unit holders of the two CapitaLand Group member companies.
The rating agency also affirmed the provisional (P)Baa3 backed senior unsecured rating on a S$1.0 billion multicurrency medium-term securities program issued by Ascott Residence's unit, and the Baa3 ratings on the backed senior unsecured notes issued under the program.
The ratings reflect the agency's expectation that Ascott Residence's merger with Ascendas Hospitality will be a credit positive for the residential trust, as the deal is expected to strengthen the company's business profile and improve its financial flexibility.
Moody's also expects that Ascott Residence's proportion of secured debt in the combined capital structure will decline as a result of the merger.
Ascott Residence's liquidity profile will weaken due to the cash consideration the company is expected to pay Ascendas Hospitality unit holders and S$75 million of debt maturities due in April 2020 at the hospitality REIT, the agency said.
The stable ratings outlook reflects Moody's expectation that Ascott Residence will continue to generate stable cash flow from its portfolio, maintain financial discipline and keep its credit profile within targeted ranges.
As of Oct. 23, US$1 was equivalent to S$1.36.