Fitch rates Hammerson as 'stable outlook'

Fitch Ratings has today affirmed Hammerson senior unsecured rating at BBB+.

The affirmation shows support for Hammerson move, announced yesterday, to raise £580m by way of a rights issue.

Fitch views this announcement as “mildly credit positive” because a successful completion of the rights issue would improve covenant headroom and provide additional liquidity under existing revolving credit facilities.

The rights issue will be used to reduce gross borrowings, at least in the near-term.

A key motivation behind the rights issue is Hammerson's intention to reduce gearing, which stood at 118% at the end of December.

The analysis by Fitch states: “With further declines in property capital values likely in 2009, it is possible that without this type of action on the part of the issuer, the tightest 150% gearing covenant level could come under pressure.

“On the basis of 2008 financial statements, management estimates that the rights issue, if approved by shareholders on 25 February, will reduce Hammerson's gearing to 81%.”

Fitch expects that the rights issue will be approved by shareholders.

It believes that a failure to achieve approval could lead to downward rating pressure as a result of reduced covenant headroom.

“There would be an increased likelihood that Hammerson would be forced to make further asset sales in order to avoid a covenant breach in the future,” argues Fitch.

“The outcome of such asset disposals in terms of price and timing would carry execution risk given ongoing weak market conditions.”