RATINGS agency Moody’s Investors Service has lowered Goodman Group’s issuer and senior unsecured rating to Baa2 from Baa1.
In addition, the subordinated debt rating on Goodman’s hybrid securities has been lowered to Baa3 from Baa2. Both ratings remain on review for possible downgrade.
VP/senior analyst Clement Chong said the downgrade is a result of Goodman’s weakened financial metrics.
“It further reflects a highly uncertain outlook for asset valuations and rental yields with the likelihood that both will further deteriorate materially in the coming 12 to 18 months.
“Expectation of falling property prices, lower overall income due to lower development income, and a generally challenging outlook for the commercial property sector, is likely to constrain these metrics further over the next 12-18 months.
“Further, the group’s ability to de-leverage is expected be hampered by property and capital markets dislocation,” Chong said.
However, Moody’s acknowledges that the group has previously demonstrated an ability to mitigate this issue through equity raising and asset sales.
“Nevertheless, meaningful further progress in de-leveraging is challenging. The review will focus on Goodman’s ability to do this at a pace and materiality that matches likely changes in asset valuations and revenue deterioration,” Chong concluded.
Australian Property Journal
