S&P cuts Vornado Realty Trust; bonds unchanged

S&P said it downgraded its issuer credit rating on Vornado Realty Trust and its operating partnership, Vornado Realty LP (collectively, VNO), to BBB from BBB+.

At the same time, S&P affirmed the BBB issue-level ratings on the company's unsecured debt given the improved level of secured debt to total assets following the JV transaction.

“The downgrade on VNO's issuer credit rating reflects our view that its competitive position is somewhat weakened from the transfer of $5.6 billion of retail assets into an unconsolidated JV. The transfer results in reduced scale and asset diversity as well as slightly weaker operating margins,” S&P said in a news release.

“In addition, we had previously assumed that VNO would be selling assets to modestly reduce leverage in advance of rising development funding needs. But we now expect S&P Global Ratings' adjusted debt to EBITDA to remain relatively flat at around 8x for the next two years.”

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