Fitch Ratings Affirms ProLogis.Business Editors NEW YORK--(BUSINESS WIRE)--June 3, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the ratings for ProLogis (NYSE NYSE See: New York Stock Exchange : PLD (Programmable Logic Device) Refers to a variety of logic chips that are programmable at the customer's site, the customer being the vendor of the finished chip, not the end user. ) at 'BBB+' for the $1.65 billion senior unsecured notes, and 'BBB' for the $400 million outstanding cumulative preferred stock Cumulative preferred stock Preferred stock whose dividends accrue, should the issuer not make timely dividend payments. Related: Non-cumulative preferred stock. . The Rating Outlook is Stable. Fitch's rating action follows the May 14, 2002 acquisition of a 9.8% interest in ProLogis by General Electric Capital Corp. (GECC GECC General Education Core Curriculum GECC General Electric Credit Corporation GECC Group Enabled Cluster Compiler GECC Geelong Ethnic Communities Council GECC Glen Ellyn Children's Chorus (Glen Ellyn, Illinois) ), which occurred indirectly through GECC's acquisition of Security Capital Group (Group). Group had previously maintained a 28% interest in ProLogis, of which approximately two-thirds was distributed to former Group shareholders. Fitch's rating affirmation follows a period of review for potential stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. activity by ProLogis, including shares currently owned by GECC, and acknowledges that share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. has not occurred either prior or subsequent to the GECC/Group transaction. Fitch notes that future repurchase activity by ProLogis could result in a negative rating action, depending on the size of the repurchase and the company's ability to repay related borrowings through proceeds from asset sales. Fitch's ratings and Outlook reflect favorably on the stable cash flows provided by ProLogis' diversified portfolio of North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. industrial properties, ability to self fund development activity and investment in sponsored funds and joint ventures, deep management team, and global operating infrastructure. The ratings also acknowledge a reduction in debt and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. over the past year, liquidity provided from the sale of cold storage businesses and recently developed properties, and moderate near term debt maturities and financing requirements. These strengths are balanced by weaker U.S. industrial market conditions that continue to pressure occupancy levels for ProLogis' stabilized and recently completed properties, and the company's relatively high percentage of earnings derived from merchant building activities and sponsored funds and joint ventures. Fitch's rating is based primarily on the capacity of ProLogis' directly-owned U.S. properties, and more specifically unencumbered properties, to service and support refinancing for unsecured debt obligations. For the first quarter of 2002, directly owned properties contributed 55% of ProLogis' total EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , with the remainder derived from merchant building profits (20%) and the company's proportionate share of earnings from off-balance sheet investments in cold storage (9%) and sponsored funds (16% including management fees). Fitch anticipates that ProLogis will continue to dispose of To determine the fate of; to exercise the power of control over; to fix the condition, application, employment, etc. of; to direct or assign for a use. See also: Dispose its remaining cold storage assets in Europe and the U.S. ProLogis' financial protection measures are considered by Fitch to be adequate for the current rating level, with EBITDA from directly owned properties providing 2.3 times (x) coverage of consolidated interest expense, which is below the company's peer group average, and unencumbered assets representing 2.1x unsecured debt obligations, which compares similarly to the company's peer group. ProLogis' total interest coverage was 3.3x including merchant profits and the company's proportionate share of EBITDA and interest expense associated with cold storage and ProLogis-sponsored funds. While Fitch recognizes the earnings contribution from merchant building activities and property funds, it believes these sources to be of lesser credit quality than EBITDA from directly owned properties. Fitch believes that merchant profits could be stressed by an extended downturn in property markets, and that leveraged off-balance sheet investments provide only moderate incremental support for refinancing of unsecured debt obligations. As the company grows these business segments, ProLogis ability to maintain a stable credit profile will depend on its ability to self-fund these activities and maintain a stable relationship between unencumbered assets and unsecured debt obligations. A comprehensive summary of ProLogis' current credit profile is available on the Fitch Ratings web site at 'www.fitchratings.com'. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion