9th Apr 2020 05:23
(Alliance News) - Moody's Investors Service on Wednesday placed Hammerson PLC under review for a ratings downgrade from Baa1, following a sharp deterioration in the shopping centre operator's environment.
The credit agency said that the real estate sector has been one of the sectors most badly hit by the shock of the rapidly spreading coronavirus outbreak, reflected by the majority of Hammerson's properties and stores being closed in line with government requirements since mid-March.
During the review process, Moody's will focus on the extent of business interruptions on Hammerson's operations, the expected impact on the retail industry in general, and the company's actions to protect its balance sheet.
Hammerson was already facing a weak operating performance due to a difficult retail property market in the UK before the outbreak, which will only increase the downward pressure on rents and asset values.
Although governments in the UK, France and other countries have announced measures to support businesses, Moody's still expects Hammerson to be compelled to provide concessions, particularly to smaller, more vulnerable brands.
The credit agency has assumed more widespread store closures in April and May, then a steady recovery in the third quarter of 2020.
"However, there are high risks of more challenging downside scenarios and the severity and duration of the pandemic and social distancing measures is uncertain. Moody's therefore expects an increasing number of tenant insolvencies and subdued leasing activity that will result in declining rental income throughout 2020 and 2021," Moody's stated.
Another concern is Hammerson's debt, which the property investor has attempted to reduce through GBP1.1 billion in disposals in the last 12 months.
"Given the changed market environment, Moody's sees little chance of substantial property sales for the duration of the pandemic. This could make it more difficult for Hammerson to maintain its target leverage ratio below 40% loan-to-value, especially if property values continue to fall," the credit agency continued.
By Dayo Laniyan; [email protected]
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