Moody’s follows through with Canary Wharf Group downgrade amid fears of a 10-15% drop in office values

Ratings agency Moody’s has followed through with its threat of downgrading one of London’s best known property companies.

After putting Canary Wharf Group on ‘review’ earlier this month, Moody's has now downgraded the company to Ba1 from Baa3.

The withdrawal of its Baa3 long term issuer rating is in line with the rating agency's practice for ‘corporates transitioning to speculative grade.

Moody's downgraded the ratings because it believes that the property company will not be able to ‘sustain credit metrics’ and an unencumbered assets ratio commensurate with the Baa3 rating level given the worsening outlook for the real estate sector and a more difficult funding environment.

The rating agency expects drops in office values that could be as high as 10% to 15% in the next 18 months which could push adjusted gross debt / total assets well above 50% from its 48.5% level as 30 June 2022.

The company-reported look through loan-to-value (LTV) was 47.8% at H1 2022, or 45.8%

Meanwhile materially increased funding costs and weaker demand for occupational space as the macroeconomic environment worsens will make it difficult for the company to materially improve its Moody's adjusted fixed charge coverage which stood at 1.2x as of 30 June 2022.

In addition, the company has still not fully addressed its near-term debt maturity profile with around £430 mln (€491 mln) of secured debt that needs to be refinanced in the first four months of 2023.

As previously reported, Canary Wharf is home to a number of skyscrapers that house some of the world's largest financial companies.  




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