Moody's may downgrade Highwoods Realty

Moody's Investors Service said it placed Highwoods Realty Limited Partnership's Ba1 senior unsecured debt rating and Highwoods Properties Inc.'s Ba2 preferred stock on review for possible downgrade.

This action reflects Moody's concerns surrounding Highwoods' timely filing of audited 2005 financial data, refinancing strategy and resolution of its 2006 debt maturities following the REIT's announcement to replace its auditors. The REIT's bank credit facility and term loan mature in July 2006 and neither has extension options, which constrains the REIT's near-term financial flexibility and liquidity.

Moody's noted that Highwoods has various resources available, including a $50 million construction revolver and a nearly $2 billion unencumbered property pool, and should have asset sales proceeds. Should Highwoods need to rely on the secured debt market for funding, however, it could result in an adverse shift in the REIT's capital strategy, the agency said.

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