Research Update: Australian Prime Property Fund Retail Outlook Revised To Negative On Potential Fund Redemptions; 'A+' Ratings Affirmed

While Australian Prime Property Fund Retail (APPF Retail)'s business risk profile remains strong underpinned by a portfolio of high-quality retail assets, the fund's credit metrics will be pressured over the next two years. On Nov. 28, 2019, S&P Global Ratings revised its outlook on APPF Retail to negative from stable. At the same time, we affirmed the 'A+' long-term issuer credit rating and 'A-1' short-term issuer credit rating on the fund. The negative outlook reflects our view that the APPF Retail's financial headroom at the 'A+' rating is diminishing, coupled with a potential call on the fund to debt finance a return of equity. At present, the fund's manager is required to fulfil equity redemption requests of about A$2.1 billion.

...- While Australian Prime Property Fund Retail (APPF Retail)'s business risk profile remains strong underpinned by a portfolio of high-quality retail assets, the fund's credit metrics will be pressured over the next two years. - On Nov. 28, 2019, S&P Global Ratings revised its outlook on APPF Retail to negative from stable. At the same time, we affirmed the 'A+' long-term issuer credit rating and 'A-1' short-term issuer credit rating on the fund. - The negative outlook reflects our view that the APPF Retail's financial headroom at the 'A+' rating is diminishing, coupled with a potential call on the fund to debt finance a return of equity. - At present, the fund's manager is required to fulfil equity redemption requests of about A$2.1 billion. This has been triggered by a "liquidity event" that has been exercised by existing unitholders and is currently required to be satisfied over the next 12 months....

Research Update