S&P casts doubt over rule changes

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Proposed changes to the rules governing Belgian SICAFIs - a local version of REITs - will increase risk and damage corporate ratings, according to Standard & Poor's.

"Loosening restrictions on gearing will increase financial risk," said Andreas Kindahl, a credit analyst with S&P. The new rules would increase the maximum gearing allowed from 50% to 65%.

The rating agency cited the change in its decision to revise its outlook on Cofinimmo from stable to negative - on the basis that the Belgian property company would take advantage of the new rules to increase its leverage through debt-funded investments.

Cofinimmo chief financial officer Jean Carbonnelle responded that at this point the risk was purely speculative - and claimed the impact of the new rules would instead lead to greater flexibility across the industry.

He said: "We can't decide before the rules exist and before we know whether there are suitable acquisitions to be made. Clearly, good practice is to be careful to align the quality of funding - and the ratio of equity to debt - with the asset.

"It is not a major change. Very few listed companies in Europe use gearing above 50%. We'll be careful about how we use gearing - if at all."

According to Kindahl, the change comes not before time. He described the current rules as "outdated", predicting the introduction of new rules before the end of the summer.

However, Carbonnelle said: "At this point we have no visibility on when the royal decree [that will formalise a change in the rules] might be passed."

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