Unibail-Rodamco-Westfield (URW) has been downgraded by credit ratings agency S&P Global after shareholders rejected the group’s plans to raise capital through a €3.5 bn rights issue.
S&P Global Ratings downgraded URW to A-/A-2 from A/A-1, with a negative outlook, saying the coronavirus-triggered shuttering of all nonessential stores in countries where the company operates will have a substantial impact on its operations.
The rating agency also lowered its ratings on the real estate investment trust's unsecured bonds to A- from A and on the juniors bonds to BBB from BBB+.
The agency said it expects a substantial drop in URW's net rental income and valuation in 2020, and only a slow recovery in 2021, due to the measures being taken as a result of the pandemic.
Also, Moody's Investors Service placed URW’s ratings on review for downgrade, including its Baa1 issuer and senior unsecured ratings as well as the Baa3 junior subordinated ratings. The outlook has changed to ratings under review from stable.
‘The review action reflects the failed capital raise that was anticipated to support credit metrics in a period of operational challenges,’ the rating agency said.
Last week an activist consortium led by former URW CEO Léon Bressler and French telecoms billionaire Xavier Niel triumphed at URW's combined general meeting, derailing plans for a €3.5 bn capital raise and winning places on the board for the rebel leaders.
Due to the Covid-19 pandemic and French government measures, the general meeting scheduled for 10 November was held remotely, with shareholder voting taking place on the evening of 9 November.
However, the URW board failed to win the two-thirds majority required to greenlight a new share issue as part of its much-heralded Reset plan, while Bressler, Niel and Susana Gallardo were elected to the supervisory board.
Reset plan
The URW-board backed Reset plan proposes completing €4 bn of property disposals by year-end 2021, carrying out a fully underwritten €3.5 bn capital raise, reducing the firm's development and non-essential operating capex by a further €800 mln and limiting cash dividend payments, resulting in €1 bn of savings over the next two years. It had been valued at around €9 bn by the board.
However, the rebel consortium, which raised its combined holding in URW to over 5% last month, managed to persuade a sufficient number of shareholders that the mooted rights issue was a 'failed strategy'. Although 61.62% of votes were cast in favour, it didn't hit the two-thirds majority required to launch the capital raise.
In October, Bressler and Niel said that the capital raise would be 'devastating' for shareholders and argued that the company should refocus instead on its European prime shopping centre portfolio and sell its US assets. Proceeds should then be used to repay its €24 bn debt load, instead of carrying out a ‘severely dilutive’ rights issue, the consortium said.
Interim URW attempts to gather experts to back its capital raise idea, amid warnings that the rebel consortium's demands would expose URW and its shareholders to 'significant risk', failed to win enough backers as the capital raise was voted down.
