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Announcement of Periodic Review: Moody's announces completion of a periodic review of ratings of Starwood Property Trust, Inc.
Global Credit Research - 22 Jul 2020
New York, July 22, 2020 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Starwood Property Trust, Inc. (STWD) and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Key rating considerations are summarized below.
STWD's Ba2 corporate family rating is based on the company's capable credit and liquidity risk management, revenue diversity within the commercial real estate (CRE) sector, strong operating performance and affiliation with Starwood Capital Group, which has considerable expertise in CRE investment and asset management. STWD maintains a strong liquidity position, underscored by diverse funding sources and manageable debt maturities, but the company is exposed to the risk of margin calls in repurchase facilities, a key funding source for its loan and securities portfolios. STWD has a higher exposure to the hard-hit hospitality sector than certain peers, representing 22% of commercial real estate loans within the Commercial and Residential Lending segment as of 31 March 2020, though the exposure is less significant compared to total earning assets. STWD's ratings are constrained by its high reliance on secured funding, including facilities with margin call exposure. As a further credit challenge, the ratings reflect the likely deterioration in asset performance and values, profitability and capital position relating to the coronavirus pandemic.
This document summarizes Moody's view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.
The principal methodology used for this review was Finance Companies Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
This announcement applies only to EU rated and EU endorsed ratings. Non EU rated and non EU endorsed ratings may be referenced above to the extent necessary, if they are part of the same analytical unit.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Mark L. Wasden Senior Vice President Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Ana Arsov MD-Financial Institutions Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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