Research Update: Australian Prime Property Fund Retail Downgraded To 'BBB+' On Persistent Unitholder Redemption Pressure; Outlook Stable

Commitments to meet unitholder redemptions have partly caused a deterioration in the credit quality of Australian Prime Property Fund (APPF) Retail. COVID-19 disruptions during the first half of 2022 and higher interest rates in the second half of calendar 2022 have weakened the fund's ratio of S&P Global Ratings-adjusted funds from operations (FFO) to debt to below our downside threshold of 15%. This metric will likely remain below 15% in fiscals 2023-2024 (year-end June 30). We lowered our long-term issuer credit rating on APPF Retail to 'BBB+' from 'A-'. At the same time, we affirmed our short-term 'A-2' issuer credit rating. The stable outlook on the long-term rating reflects our expectation that APPF Retail will continue to balance the interests

...- Commitments to meet unitholder redemptions have partly caused a deterioration in the credit quality of Australian Prime Property Fund (APPF) Retail. - COVID-19 disruptions during the first half of 2022 and higher interest rates in the second half of calendar 2022 have weakened the fund's ratio of S&P Global Ratings-adjusted funds from operations (FFO) to debt to below our downside threshold of 15%. This metric will likely remain below 15% in fiscals 2023-2024 (year-end June 30). - We lowered our long-term issuer credit rating on APPF Retail to '###+' from 'A-'. At the same time, we affirmed our short-term 'A-2' issuer credit rating. - The stable outlook on the long-term rating reflects our expectation that APPF Retail will continue to balance the interests of its unitholders with those of its creditors. We expect the fund to ensure that its FFO-to-debt ratio stays above 12%....

Research Update