Ratings agency Moody’s Investors Service on Monday (Oct 13) said regulatory proposals to tighten Singapore’s Real Estate Investment Trusts (S-REITs) are “credit positive”. The US-based firm added that the regulatory proposals by the Monetary Authority of Singapore (MAS) would foster financial discipline, enhance corporate governance and strengthen investor confidence.
The proposed changes include adjustment to borrowing limits. Under the current rules, rated S-REITs can borrow up to 60 per cent of their total assets, while unrated S-REITs can leverage up to 35 per cent. MAS is now proposing a single-tier leverage limit of 45 per cent across the industry, regardless of whether the REIT has been rated.
In a statement, Moody’s assistant vice president and analyst, Ms Jacintha Poh, said: “Notably, the proposal to lower the borrowing limits for Moody’s-rated S-REITs would ensure that they maintain a prudent approach when funding expansion plans and reduce potential losses to creditors”.
Other proposals which Moody’s said are credit positives include strengthening corporate governance and enhancing disclosures on income support arrangements, total operating expenses, length of new leases and debt maturity profiles.
The ratings agency said these will improve transparency and make these property investment vehicles more attractive to investors.
Source : Channel NewsAsia – 14 Oct 2014