Allco Reit fails in legal bid to head off ratings downgrade

Allco Commercial Real Estate Investment Trust (Allco Reit) has failed in its attempt to obtain a court injunction to head off a downgrade by Moody's Investors Service.

And the ratings agency has gone ahead to downgrade the Reit, as well as signal the possibility of a further cut in ratings.

Allco Reit, represented by Senior Counsel Alvin Yeo of Wong Partnership, had applied for an injunction from Singapore's High Court to prevent Moody's from issuing a downgrade on the trust.

It is believed the Reit sought the injunction as it felt that a ratings downgrade would have interfered with its fund-raising efforts.

The application for the injunction had been initiated by British and Malayan Trustees on behalf of Allco Reit.

But the Reit's injunction was set aside yesterday morning by Justice Choo Han Teck. Allco Reit had intended to appeal the decision, but the High Court announced several hours later that the trust had decided to withdraw its appeal.

Moody's subsequently went ahead with its downgrade of Allco Reit, announcing its rating yesterday afternoon. The agency lowered the trust's corporate family rating to 'Ba2' from 'Ba1' - and retained the ratings on review for further possible downgrade.

It said that the review would focus on issues raised by Allco Reit's announcement on March 9, the progress and terms of its refinancing efforts for debt maturing in coming months and other material developments affecting Allco Reit.

Representatives from Allco Reit, when contacted, declined to comment on the court proceedings. But the Reit's manager, Allco (Singapore) Limited, subsequently issued a statement on the Singapore Exchange's website, confirming the ratings downgrade and ongoing review of that rating by Moody's.

Allco Reit's concerns about the impact of a ratings downgrade on its fundraising efforts were heralded by Fitch Ratings last week. Fitch had signalled that the credit ratings of Singapore property trusts may change because of expected mergers and acquisitions.

Fitch had expressed concern that the global credit crunch sparked by US mortgage defaults may impact the ability of Singapore Reits to take advantage of any acquisition opportunity and that it would certainly limit the number of any interested parties in any asset disposals.

Allco Reit had earlier this month said that it may sell its Australian assets - properties valued at A$483 million (S$617 million) - which include its 50 per cent interests in Perth's Central Park office tower and Centrelink Headquarters in Canberra. The Reit is also invested in Allco Wholesale Property Fund which in turn has interests in several properties in Sydney.

Its three key properties - China Square Central and 55 Market Street in Singapore, and Central Park in Perth - had a combined value at the end of December of $1.13 billion, based on the latest revaluation.