muddy waters

From: Henry McClure [mailto:mcre@cox.net]
Sent: Tuesday, February 06, 2018 12:58 PM
To: 'John Parker' <jparker@mainlineprinting.com>
Cc: Paul Katz <Paul.Katz@washingtonprime.com>
Subject: Moody's affirms Washington Prime's Baa3 rating; outlook revised to negative

JP

Look at the financial rating.  How can a company in such poor condition jeopardize deals?  We can save them $300K in capital NOT moving the security office and start getting rent in 30 Days.

Remember it has taken an average of 8.67 months to get deals done at West Ridge.

It is best we stay in front of them.  Mace said “you need to make the deal in front of you”.

Let me know if you hear from Paul. We are off to the races.    

Rating Action: Moody's affirms Washington Prime's Baa3 rating; outlook revised to negative

Global Credit Research - 01 Jun 2017

Approximately $450 million in securities affected.

New York, June 01, 2017 -- Moody's Investors Service ("Moody's") affirmed all of Washington Prime Group Inc. (WPG)'s ratings, including the Baa3 senior unsecured debt rating of its operating subsidiary, Washington Prime Group, LP. The outlook was revised to negative from stable.

The following ratings were affirmed:

Washington Prime Group, LP -- issuer rating at Baa3; senior unsecured debt at Baa3

Washington Prime Group Inc. -- preferred stock at Ba1

RATINGS RATIONALE

The negative outlook reflects the potential cash flow risk associated with the REIT's mall portfolio due to an increasingly challenging retail environment, especially for mall owners such as Washington Prime that own portfolios with relatively low sales per square foot (below $400). Moreover, the REIT has significant upcoming debt maturities as $938 million comes due in 2019 and an additional $947 million in 2020 (including extension options).

Washington Prime's comp NOI declined 0.7% for 1Q17, with a 1.8% decline in mall NOI partially offset by 2.9% NOI growth from its community centers. The REIT's community centers contribute 25% of total NOI and are viewed as good quality assets that provide a stable source of cash flows, a key credit strength supporting its ratings.

Washington Prime's Tier 2-mall properties (20% of NOI), however, experienced a 5.8% decline in comp NOI and Moody's is concerned about the potential for accelerated declines as these malls are more vulnerable amidst the challenging retail climate. Store closures and tenant bankruptcies have been on the rise, as retailers are facing increased competition from e-commerce and changing consumer preferences, a trend that is expected to continue for the foreseeable future.

The affirmation of Washington Prime's rating reflects its strong fixed charge coverage, growing unencumbered assets , national platform and diversification across two complementary asset categories that enhances its leasing strategy. The REIT has also reduced debt levels, although leverage is still considered high given our concerns about its lower productivity malls amidst the current retail environment.

As a result of these concerns, Moody's expects stronger credit metrics at the current rating level to counterbalance the REIT's portfolio risk. A downgrade would result should Net Debt/EBITDA exceed 6.0x or fixed charge coverage fall below 3.2x on a sustained basis. Furthermore, failure to proactively refinance upcoming debt maturities and significantly lengthen its maturity profile would also result in a downgrade. Continued negative operating trends and, particularly, continued adverse developments in the retail space would also put pressure on the rating.

An upgrade is unlikely in the intermediate term given the negative outlook. Longer term, positive ratings movement would reflect improved asset quality (as measured by mall sales per square foot above $450 on average) and sustained positive operating trends. Net Debt/EBITDA around 5x, fixed charge coverage above 4x and secured debt closer to 10% of gross assets would also be needed.

Washington Prime Group Inc. (NYSE: WPG) is a retail REIT that owns and manages 110 enclosed and open air shopping centers totaling 60 million square feet across the United States.

The principal methodology used in these ratings was Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Lori Marks

VP - Senior Credit Officer

Commercial Real Estate Group

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653

Nick Levidy

MD - Structured Finance

Commercial Real Estate Group

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653

Releasing Office:

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653