Moody's cuts Brookfield Residential notes

Moody's Investors Service said it downgraded Brookfield Residential Properties Inc.'s senior unsecured notes to B2 from B1. Brookfield Residential's B1 corporate family rating, B1-PD probability of default rating and SGL-3 speculative grade liquidity rating remain unchanged.

The downgrade reflects the increase in secured construction loans at the company's OliverMcMillan Spectrum Emery LLC and OliverMcMillan Kuhio LLC subsidiaries to fund mixed-use developments. At March 2021, the amount outstanding had grown to around $390 million from about $230 million the prior year. As a result, and in accordance with Moody's loss given default for speculative-grade companies methodology, the unsecured notes are now rated one notch under the B1 CFR given their subordination to the secured debt,” Moody’s said in a press release.

Moody's said it expects the amount outstanding under the construction loans to increase to around $500 million as the company completes the projects.

The outlook is stable.

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