Moody’s places Mapletree Commercial under review for downgrade on proposed merger

Mapletree Commercial Trust's Mapletree Business City property in Singapore. Mapletree North Asia Commercial Trust (MNACT) and Mapletree Commercial Trust agreed in December 2021 to merge to form Mapletree Pan-Asia Commercial Trust. Credit: Mapletree Commercial TrustMapletree Commercial Trust's Mapletree Business City property in Singapore. Mapletree North Asia Commercial Trust (MNACT) and Mapletree Commercial Trust agreed in December 2021 to merge to form Mapletree Pan-Asia Commercial Trust. Credit: Mapletree Commercial Trust

Moody’s Investors Service has placed Mapletree Commercial Trust’s Baa1 issuer rating on review for a downgrade after the trust’s merger bid for Mapletree North Asia Commercial Trust (MNACT), the ratings service said in a statement Wednesday.

“The review for downgrade reflects the potential weakening of MCT’s credit metrics and uncertainty around its financial policy following the merger with MNACT. However, the final impact remains uncertain as the merger is still subject to, amongst others, the approval of the unitholders,” Junling Tan, a Moody’s analyst, said in the statement.

On Friday, the two trusts announced a plan to merge into Mapletree Pan-Asia Commercial Trust in a S$4.22 billion deal, creating one of Asia’s top-10 largest REITs with assets across Singapore, South Korea, China, Hong Kong and Japan.

Under the deal, which will be a trust scheme of arrangement, unitholders of MNACT will receive S$1.1949 for each unit, to be paid by either 0.5963 new MCT unit issued at S$2.0039, or a combination of 0.5009 MCT unit and S$0.1912 in cash, the trusts said Friday.

The pricing is a 7.6 percent premium to MNACT’s unit price of S$1.11 on 27 December, and a 14.4 percent premium to its one-month volume weighted average price (VWAP) of S$1.0449, the trusts said.

Moody’s also said it has placed MCT’s (P) Baa1 senior unsecured ratings on the medium-term note programs under review for a downgrade, as well as changing the outlook on the trust’s ratings to “under review” from “stable.”

For MNACT, Moody’s has placed its Baa3 issuer rating and its provisional (P)Baa3 ratings on its senior unsecured euro medium-term note (EMTN) program on review for upgrade, the statement said. The ratings service said it changed the outlook for all of MNACT’s ratings to “under review” from “negative.”

“The review for upgrade reflects our expectation that MNACT’s rating could benefit from its 100 percent ownership by MCT, following the completion of the proposed merger,” Tan said.

“However, the final impact on MNACT’s rating will depend on our assessment of the likelihood of extraordinary support that MCT will provide to MNACT in case of distress,” she added.