Third, the transaction has conservative loan to value and debt service coverage ratios
that will provide protection to the noteholders of timely payment of interest and principal commensurate with the assigned rating level.
The indenture limits additional debt other than the currently outstanding notes to debt for working capital up to $20 million, and debt for capital expenditures and/or subordinated debt providing that the projected debt service coverage ratio
(DSCR) exceeds 1.
The company's debt service coverage ratios
are supported by positive leasing spreads that have been in the double digits on a percentage basis across the portfolio over the past several years.
Also, these noncrossed deals, which may have debt service coverage ratios
that vary significantly from one loan to the next, need to be analyzed on a loan-by-loan basis.
Debt service coverage ratios
have been consistently solid with interest and fixed charge coverage measuring 2.
While the CRP acquisition adds a large pool of high quality senior housing and medical office assets to HCP's existing, diversified portfolio and increases the company's exposure to private pay sources of revenue, Fitch is very concerned by the significant increase in leverage and related erosion in debt service coverage ratios
resulting from the acquisition.
Fitch also notes that HCN has indicated that it intends to maintain debt service coverage ratios
and leverage within existing ranges after the closing of the acquisition.
Though the company's leverage will likely increase and its debt service coverage ratios
(DSCR) may decrease somewhat, Fitch expects the company to finance the acquisition in a manner that is appropriate for the existing ratings.
NHP maintains solid debt service coverage ratios
, a sizable pool of unencumbered assets, well-laddered debt maturities and minimal lease expirations over the next several years.