Rating agencies in Israel are reassessing the creditworthiness of New York-based real estate developers trading on the country’s bond market, as the economic impact of coronavirus continues to unfold.
The latest company to face a ratings drop was Yoel Goldman’s All Year Management, whose four bond series all saw two-step downgrades from rating agency Midroog, according to a Sunday filing on the Tel Aviv Stock Exchange.
The firm’s unsecured Series B and D bonds were downgraded from A3 to Baa2, while its Series C and E bonds — secured by the William Vale hotel complex and phase one of the Denizen Bushwick development — went from A2 to Baa1.
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According to Midroog’s report, the developer is close to violating financial covenants associated with its bonds, and its leverage is expected to remain high even after the planned sale of a roughly $300 million multifamily portfolio in the near term.
That portfolio deal encountered a hiccup last week as All Year disclosed that the buyer, David Werner, had not paid the remainder of its deposit on time. Midroog has given All Year’s bonds a negative outlook due to these developments.
A representative for All Year declined to comment.
All Year is far from the first New York City-based real estate firm to face scrutiny in these uncertain times. In late March, rating agency Maalot — an S&P Global subsidiary — downgraded Related Companies’ Israeli bonds from A+ to BBB in light of an impending maturity date. A few months later, Related received bondholder approval to restructure its debt, and the bonds were upgraded to A — still one notch below their pre-coronavirus position.
Extell Development’s bonds were also put on watch in late March, and in June Midroog officially downgraded the developer’s bonds by one level, from A3 to Baa1, with a negative outlook. The main reason for the move was the expected decline in the pace of condo sales, as well as prices, as a result of the pandemic. (Contracts for condos in Manhattan saw a nearly 38 percent year-over-year drop in August.)
Earlier in June, Midroog also downgraded Moinian Group’s bonds by two grades, from A1 to A3, with a negative outlook, citing the lack of sufficient liquidity to cover debt service requirements. The agency reiterated its negative outlook for Moinian’s bonds in a new filing last week.
Extell and Moinian did not respond to requests for comment.
These rating downgrades have led to increased interest rates on the firms’ bonds, which — combined with continued weakness of the dollar versus the shekel — has led to an increase in debt obligations.