Investa Office Fund #BBB+# Ratings Placed On CreditWatch Negative Following Proposed Acquisition By Blackstone

Stocks and Financial Services Press Releases Thursday June 14, 2018 18:51
MELBOURNE--14 Jun--S&P Global Ratings

MELBOURNE (S&P Global Ratings) June 14, 2018--S&P Global Ratings today said it has placed its 'BBB+' issuer credit ratings and issue ratings on Investa Office Fund (IOF) on CreditWatch with negative implications.

The CreditWatch placement follows an all cash proposal from Blackstone to acquire IOF's equity. The current bid is a binding proposal and is subject to a Scheme Implementation Agreement (SIA). We believe that the credit quality of IOF could be negatively impacted if we regard Blackstone as a financial sponsor, thus raising the potential for a more aggressive financial policy at IOF going forward. Such an assessment could result in a multiple notch downgrade for IOF. While the directors of IOF have recommended the proposal, it remains subject to an independent expert's opinion and in the absence of a superior proposal.

Blackstone has conducted its due diligence and is now proceeding with the SIA. This agreement sets out the terms under which the takeover and subsequent delisting of IOF will occur. The current timetable envisages an explanatory memorandum being sent out to unitholders before the end of July with a unitholder meeting to be subsequently held and the implementation of the scheme concluding in late August.

The SIA indicates that Blackstone has the ability to prepay the existing debt and withdraw the credit rating on IOF. IOF's current debt structure comprises a mix of A$ bank debt, A$ medium term notes and US$ Private Placements. At Dec. 31, 2017, the total debt outstanding was A$1,012.7 mil.

We will continue to monitor the takeover. Key to our deliberations in resolving the CreditWatch status will be ascertaining what Blackstone's intentions are for the current debt holders, the ownership structure, and IOF's future operating strategy. If the Blackstone proposal is approved and we believe that the credit quality of IOF is likely to deteriorate, we would lower the rating.


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