Moody’s places NRI’s B1 on review for possible upgrade

By k on August 7, 2009

Tokyo, August 07, 2009 — Moody’s Investors Service has placed on review

for possible upgrade its B1 issuer and senior unsecured long-term debt

ratings for Nippon Residential Investment Corporation (NRI).

This review follows the announcement on August 6, 2009 by Advance

Residence Investment Corporation (ADR) and NRI on their basic agreement

of an M&A.

Previously, Pacific Holdings, Inc, a sponsor of NRI, filed a petition

with the Tokyo District Court on March 10, 2009 to begin corporate

reorganization proceedings.

NRI believes that the presence of a sponsor company would be necessary

for building a stable financial base and growth strategy in the long

term. NRI is conducting its selection of a new sponsor with the support

of an external advisor.

Clear details on the schedule for the M&A have yet to be revealed, but

Moody’s believes the transaction will facilitate the NRI’s business

restructuring and therefore placed its ratings on review for possible

upgrade.

According to the announcement, ITOCHU Corporation (Baa1), a sponsor of

ADR, will continue to support the new REIT and thus multi-notch upgrades

may occur as its creditworthiness would — assuming the M&A proceeds –

exceed that of NRI.

In its review, Moody’s will focus on the progress of the M&A, the

refinancing of the relevant loans and the redemption of the bonds.

Moody’s previous rating action on NRI took place on February 5, 2009 when

it downgraded the issuer and unsecured senior debt ratings to B1 from Ba2

with a negative outlook. The rating action also takes into account the

fact that NRI’s rated bonds are subordinated to its outstanding

borrowings.

The methodology used in rating REITs was the “Rating Methodology for REITs

and Other Commercial Property Firms” (January 2006) which can be found

at www.moodys.com in the Credit Policy & Methodologies directory, in the

Ratings Methodologies subdirectory.

Nippon Residential Investment Corporation is a Japanese real estate

investment trust investing in and managing residential properties. Its

operating revenues totaled approximately JPY 9.1 billion for the fiscal

half-year ended May 2009.

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