Singapore proposes interest coverage ratio of 1.5 to all REITs

Currently, the ICR of 2.5 times applies only to select REITs.

Singapore has proposed a minimum interest coverage ratio (ICR) threshold of 1.5 times for all REITs in the city, whilst the proposed aggregate leverage limit is 50%.

In a press release, the Monetary Authority of Singapore (MAS) said that the proposed threshold will be applied at all times to all Singapore REITs (S-REITs).

Currently, the ICR requirement of 2.5 times was only required to S-REITs which intend to increase their aggregate leverage from 45% to 50%.

The move is part of its bid to simplify the leverage requirements of the sector, MAS said.

The minimum ICR “underscores the responsibility of REIT managers in ensuring that REITs can adequately meet their interest payments,” Singapore’s financial regulator added.

MAS has also proposed that all S-REITs perform and disclose sensitivity analyses on the impact of changes in EBITDA (earnings before interest, tax, depreciation and amortisation), and interest rates on REITs’ ICRs.

The S-REITs must make this disclosure in their interim financial results and annual reports.

This is so that investors can have access to information on how an S-REIT’s credit profile could be affected by changes in market conditions.

MAS invites views and suggestions from interested parties on the proposals set out in the consultation paper. Comments may be submitted until 23 August.