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Singapore, May 26, 2009 -- Moody's Investors Service has today affirmed CapitaCommerical Trust's (CCT) Baa2 corporate family and Baa3 senior unsecured debt ratings. The outlook on the ratings is negative. This follows CCT's announcement that it is to launch a fully-underwritten 1-for-1 rights issue to raise approximately SGD828.4 million, and which is scheduled to be completed in early July 2009. The proceeds are expected to go towards debt retirement. "The equity raising, if completed, is expected to materially improve CCT's credit metrics to the extent that its Debt/EBITDA leverage ratio falls to 7x - 8x (from 10x - 11x) and its EBITDA/Interest coverage increases to 2.6x -- 2.9x range (from 2.0x to 2.2x). These metrics are appropriate for the Baa2 corporate family rating," says Kathleen Lee, a Moody's VP/Senior Analyst. "In addition, the equity raising will also enhance CCT's financial flexibility, as the proceeds will address most of its 2010 refinancing requirements. Meanwhile, the tight headroom of its Loan--to-Value and EBITDA/Interest financial covenants in its banking facilities will also be vastly improved," adds Lee, also Moody's lead analyst for the trust. As a result of these enhancements, Moody's expects to revise the ratings outlook to stable upon completion of the capital raising. Moody's remains cautious of the weakness in CCT's operating environment, given the deepening of the recession in Singapore and strong upcoming new office completions from 2009 onwards. However, the stable outlook is underpinned by the fact that the equity offerings would provide CCT with a cushion against a potential asset devaluation of up to 35% (after a 10% devaluation in 2Q09) before pressure on the ratings emerges. The upward rating pressure is unlikely to occur over the next 12 to 18 months given the challenging operating environment. Downward rating pressure would develop should the REIT's operating performance disappoint, with EBITDA/Interest coverage staying below 2.5x and Debt to EBITDA rising above 8x on a consistent basis. The previous rating action with regard to CCT was taken on 3 March 2009 when the trust's corporate family rating was downgraded to Baa2 with a negative outlook.
The principal methodology used in rating CCT was the Rating Methodology for REITs and Other Commercial Property Firms, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory. CapitaCommerical Trust is a Singapore-based REIT which invests in commercial properties. As of 11 July, 2008, CCT owned a portfolio of high-quality properties, mainly in Singapore's CBD, with a valuation of approximately S$6.7 billion.