Investment management firms, GLP Pte Ltd (GLP) and GLP China Holdings Ltd were downgraded to BBB- from BBB with a stable outlook by S&P Global Ratings on Friday as GLP’s transition to an asset-light logistics fund management business is delayed. GLP specializes in logistics, technology investments, real estate, and private equity funds. According to the rating agency, the aggressive operating strategy of the company lengthens its asset monetization cycle, which results in volatility to its cashflows and earnings. The non-recurring EBITDA, which has been more than 30% since 2019, remains a cause of concern. The non-recurring EBITDA was 52% in 2020 and is expected to peak to 64-68% in 2021 before reducing to 50-55% in 2022 and to 30-35% in 2023 against previous expectation of 30% by 2022. On the positive side, the company plans for heavy asset monetization in 2021 to support its ongoing development capex and to reduce its higher-than-expected adjusted debt level in 2020. The plan is supported by a new fund formed last year with uncalled commitments of $7.1bn as of December 2020. A favorable investor demand and the reducing pandemic effect could help the company’s capex touch a multi-year high of $7.8-7.9bn. GLP’s high adjusted debt could also reduce to $13.2-13.7bn by the year end. GLP’s adjusted debt (gross) as of end-2020 rose to $15.3bn, from $13.1bn a year earlier, because of slower than expected asset monetization in 2020.

While GLP’s 3.875% 2025s were down 0.27 to trade at 104.73, GLP China’s 4.974% 2024s and 2.95% 2026s were down 0.11 and 0.43 to trade at 107.26 and 100.24 on the secondary markets.
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