OREANDA-NEWS. Fitch Ratings has assigned Singapore-based Mapletree Industrial Trust's (MIT; BBB+/Stable) new SGD60m 3.79% fixed-rate unsecured and unsubordinated notes due in March 2026 a rating of 'BBB+'. The agency has also affirmed MIT's 'BBB+' long-term ratings on the aggregate outstanding SGD245m unsecured unsubordinated medium-term notes.

The new and the outstanding notes are issued by Mapletree Industrial Trust Treasury Company Pte. Ltd., a subsidiary of MIT, and guaranteed by DBS Trustee Limited. DBS Trustee Limited acts as trustee for MIT. The new and outstanding notes are part of MIT's SGD1bn multi-currency medium-term note programme.

The notes constitute direct, unconditional, unsubordinated and unsecured obligations of Mapletree Industrial Trust Treasury Company and the guarantor.

Fitch expects MIT to use the issue proceeds to refinance part of its debt that falls due in the fiscal year ending 31 March 2017 (FY17). MIT's funding costs are likely to increase in 2016, albeit from a low of 2.4% in 3QFY16, because around SGD420m of existing interest-rate hedges will expire over the period. The new issue will also lengthen MIT's weighted average debt maturity of 3.6 years as of 31 December 2015. MIT has sufficient unutilised credit facilities, as well as available cash to meet its debt servicing and committed capex in FY17 and FY18.

KEY RATING DRIVERS
Good Assets, Granular Portfolio: MIT's portfolio consists of 84 properties across five industrial property types, with over 14.8 million square feet of net leasable area. It has low industry and tenant concentration, with no single industry accounting for more than 16% of revenue, and the 10 largest tenants contributing to around 17% of revenue. MIT continues to record positive rental roll-over rates - its portfolio-wide rent per square foot increased to SGD1.89 in 3QFY16, up 3.3% from 3QFY15. The quarterly occupancy rate has remained over 90% on average since its IPO in October 2010.

Geographic Concentration and Limited Scale: MIT's rating is constrained because its assets are concentrated within Singapore, and it has limited operating scale compared to higher-rated global property investment companies.

Strong Financing Flexibility: MIT has low interest-rate risk and strong financing flexibility. As of end-2015, MIT had an FFO fixed-charge cover of over 9x, with more than 85% of its debt hedged or priced at fixed interest rates. Its FFO net leverage stood at 5x and its debt to investment property assets ratio was 28%. It has zero encumbrances on its assets, which provides an unencumbered asset cover of more than 3.0x to its unsecured debt.

Strong Sponsor: MIT benefits from competitively priced debt funding and strategically located investment properties because it is sponsored by Mapletree Investments Pte Ltd, which is a leading real estate development, investment and capital management company in Singapore, with more than SGD30bn of assets under its management.

KEY ASSUMPTIONS
Fitch's key assumptions within our rating case for the issuer include:
- Low single-digit organic revenue growth in the medium term, boosted by revenue from several development projects coming on stream
- EBITDA margins to remain at over 63%, and to improve towards FY18 as a result of the income boost from development projects
- Maintenance capex to remain at historical levels; SGD170m to be incurred in FY16 and FY17 on the Hewlett Packard built-to-suit project.

RATING SENSITIVITIES
Positive: No positive rating action is expected in the medium term given MIT's geographic concentration in Singapore and limited scale compared with higher-rated global property investment companies.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- FFO fixed-charge coverage sustained below 5x
- FFO adjusted net leverage sustained above 6x and the ratio of gross debt net of readily available cash to investment property value (LTV) sustained above 40%-45%
- Unencumbered assets / unsecured debt below 2x
- A sustained and material weakening in the competitive position of MIT's assets, as evidenced in weaker rental renewal rates and occupancy levels, resulting in EBITDA margin sustained below 60% (9MFY16: 65.2%).