Fitch: WPG Bond Offering Smaller Than Expected; Bridge Financing Remains Outstanding

NEW YORK--(BUSINESS WIRE)-- The inaugural senior unsecured notes offering by Washington Prime Group, L.P., a subsidiary of WP Glimcher (NYSE: WPG or the company), was smaller and of a shorter average tenor than Fitch's expectations. As a result, WPG will continue to have drawn borrowings under its bridge agreement longer than expected and will require an additional capital transaction (e.g., a second unsecured bond offering or another long term capital source) over the next year.

PRICING OF SENIOR NOTES

Yesterday WPG priced $250 million principal amount of 3.85% senior notes due April 1, 2020, to which Fitch assigned a credit rating of 'BBB-'. Closing of the offering is expected to occur on March 24, 2015. The company intends to use the net proceeds from the offering to repay a portion of the outstanding borrowings under its bridge agreement plus accrued and unpaid interest thereon. On Jan. 15, 2015, Washington Prime Group, L.P. borrowed $1.19 billion pursuant to the $1.25 billion bridge agreement that was put in place to facilitate the merger of Washington Prime Group, Inc. and Glimcher Realty Trust (previously NYSE: GRT), which formed WP Glimcher.

CREDIT IMPLICATIONS

Together with $430 million of proceeds from a joint venture announced with O'Connor Mall Partners, L.P., the senior notes offering will result in approximately $620 million of borrowings outstanding under the bridge agreement, after the redemption of the company's 8.125% series G preferred stock as announced on March 12, 2015. Fitch previously anticipated that the company would issue five-year and 10-year notes to repay all borrowings under the bridge agreement. Since the company only priced five-year notes, Fitch anticipates that WPG will need to access the unsecured bond market again or another long-term capital source over the next year to repay remaining borrowings outstanding under the bridge agreement while also staggering the debt maturity schedule.

RATING SENSITIVITIES

The following factors may have a positive impact on the rating and/or Outlook:

--Fitch's expectation of leverage sustaining below 6.0x (pro forma leverage is 6.8x);

--Fitch's expectation of fixed charge coverage sustaining above 2.5x (pro forma fixed-charge coverage is 2.1x);

--Fitch's expectation of unencumbered assets, using a stressed 8.5% capitalization rate, coverage of net unsecured debt sustaining above 3.0x (this ratio is 2.0x pro forma).

The following factors may have a negative impact on the ratings and/or Outlook:

--Liquidity coverage sustaining below 1.0x (this ratio is 0.6x pro forma);

--Sustained deterioration in operating fundamentals or asset quality (e.g., sustained negative SSNOI results or negative leasing spreads);

--Fitch's expectation of leverage sustaining above 7.0x;

--Fitch's expectation of fixed charge coverage sustaining below 1.8x.

Fitch currently rates WP Glimcher and Washington Prime, Group, L.P. as follows:

WP Glimcher

--IDR 'BBB-'.

Washington Prime Group, L.P.

--IDR 'BBB-';

--$900 million senior unsecured revolving credit facility 'BBB-';

--$500 million senior unsecured term loan 'BBB-';

--$250 million senior unsecured notes due 2020 'BBB-'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'WP Glimcher - Ratings Navigator' (Feb. 26, 2015);

--'2015 Outlook: U.S. Equity REITs' (Dec. 16, 2014);

--'Recovery Ratings and Notching Criteria for Equity REITs' (Nov. 18, 2014);

--'Corporate Rating Methodology' (May 28, 2014);

--'Rating U.S. Equity REITs and REOCs: Sector Credit Factors' (Feb. 26, 2014).

Applicable Criteria and Related Research:

WP Glimcher - Ratings Navigator

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862061

2015 Outlook: U.S. Equity REITs (Capital Access Underpins Disciplined Growth)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=828828

Recovery Ratings and Notching Criteria for Equity REITs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=813628

Rating U.S. Equity REITs and REOCs (Sector Credit Factors)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=737957

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst
Sean Pattap
Senior Director
+1 212-908-0642
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Britton Costa, CFA
Director
+1 212-908-0524
Committee Chairperson
or
Steven Marks
Managing Director
+1 212-908-9161
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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