UPDATE: American Realty Capital Properties (ARCP) may be cut to junk by S&P

October 29, 2014 2:54 PM EDT
(Updated - October 29, 2014 3:02 PM EDT)

American Realty Capital Properties (NASDAQ: ARCP) may be cut to junk by S&P.

UPDATE - More form S&P's press release:

Standard & Poor's Ratings Services today placed its ratings, including the 'BBB-' corporate credit rating on American Realty Capital Properties Inc. (ARCP) and its operating partnership, ARC Properties Operating Partnership L.P, on CreditWatch with negative implications.

ARCP is a comparatively young, but large triple-net lease REIT that has grown very quickly in 2014 as a result of heightened portfolio acquisition activity. On Oct. 29, 2014, ARCP announced that its CFO and CAO were resigning because of accounting improprieties. Existing employees have been appointed to replace the departed CFO and CAO.

"The CreditWatch placement reflects some uncertainty, in our view, that the company has the adequate infrastructure to manage its robust growth and we will monitor the extent to which the company's access to equity and debt capital markets is impacted by these events," said credit analyst Jaime Gitler. "An investigation underway by the audit committee of the company's board of directors has not uncovered any errors that would affect previously reported audited results, but the investigation is on-going and we will monitor developments as they occur."

Standard & Poor's will seek to resolve the CreditWatch within the next 90 days. We will meet with management within the next few weeks to review the company's plan to bolster its infrastructure and improve financial controls. Upon completion of our review, we could lower the corporate credit rating by one notch (corporate credit rating to 'BB+' from 'BBB-') or we could leave the ratings unchanged.

  • American Realty Capital Properties Inc. (ARCP) has announced that its CFO and CAO have resigned effective immediately in light of accounting improprieties in the financial statements.
  • A new financial leadership team has been appointed to replace the executives that departed.
  • We are placing our ratings on ARCP on CreditWatch with negative implications following these announcements.
  • We will meet with management to evaluate the capability of the newly installed financial executives and will review efforts underway to improve financial controls and transparency in the financial statements. We will seek to better understand any potential fallout or implications for capital availability as a result of this news and may reconsider our current assessment of the company's business risk profile.

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