S&P Lifts Outlook on Brixmor Property Group (BRX) to Stable; Ratings Affirmed

November 11, 2016 11:16 AM EST

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S&P Global Ratings affirmed its 'BBB-' corporate credit rating on Brixmor Property Group Inc. (NYSE: BRX) and revised the outlook to stable from negative. At the same time we also affirmed the 'BBB-' issue-level rating on the company's senior unsecured notes.

"The outlook revision to stable reflects our view that downside risk related to potential strategic and operational shifts following issues surrounding the improper smoothing of quarterly same-store NOI is now limited. We believe the newly appointed management team has implemented key initiatives that should better support the company's business and financial functions, improve overall corporate culture, and enhance internal controls," said credit analyst Kristina Koltunicki. "We expect the company will continue to re-lease recaptured boxes at higher rents and target flat SG&A growth. However, the potential significant monetary damages resulting from impending investigations could impair future EBITDA growth and use liquidity but are not included in our base-case scenario given uncertainty as to amount and timing."

The stable outlook on Brixmor reflects our view that credit protection measures should continue to improve over the next two years as we expect positive operating trends supported by rental rate increases and occupancy gains. We view the successful execution of two unsecured bond issuances to repay secured debt and the implementation of various internal governance initiatives as constructive demonstrations of access to capital and that former management indiscretions have largely been remedied.

We could consider raising our ratings on Brixmor if the company continues to strengthen its credit protection measures and improve operating metrics. Appropriate credit measures for an upgrade would include FCC sustained in the mid-3x range or better and debt to EBITDA in the low-6x range. At the same time, we would expect operating metrics to improve to levels more closely aligned with peers through the successful execution of the company's asset redevelopment strategy.

We could lower the ratings if the company experiences financial or operational shifts over the next two years leading to weaker-than-expected operating performance or the inability to execute on previously planned initiatives. This could occur if debt to EBITDA reverses to more than 7.5x on a sustained basis.



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