Vornado Realty Trust (VNO) Ratings Placed on CreditWatch Negative by S&P

November 1, 2016 11:05 AM EDT

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S&P Global Ratings placed all of its ratings on Vornado Realty Trust (NYSE: VNO) on CreditWatch with negative implications.

"The CreditWatch placement follows Vornado's announcement that it has entered a definitive agreement to spin-off its Washington, D.C., business segment and merge it with the management business and select properties managed by JBG. The tax-free spin-off is expected to close in the second quarter of 2017," said credit analyst Anita Ogbara. "The CreditWatch placement reflects our view of the possible impact of Vornado's reduced geographic diversity pro forma for separation of the D.C. assets. Following the spin-off, Vornado will be geographically concentrated, generating almost 90% of its EBITDA from high-quality office and retail assets in New York City. In early 2015, Vornado spun-off its strip mall assets into Urban Edge Properties and distributed its value to its shareholders."

We will meet with management to discuss the company's competitive position, diversity, operating performance, and profitability pro forma for the spin-off the company's and will resolve the CreditWatch placement after we have completed our review of the spinoff's impact on Vornado's credit profile. Subject to progress on the spin-off and visibility into successful completion, this could occur in the next 90 days. Our initial view is that we could either lower our corporate credit rating on the company by one notch or affirm the current rating.



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