S&P prepares for shockwaves

Standard & Poor’s (S&P) is in discussions with Australian funds managers to determine the ramifications of the Lehman Brothers collapse for local investors.

It believes many Australian funds will have exposure to assets associated with the fallen US firm.

The research house has already placed one fund ‘on hold’ following the overnight announcement that Lehman Brothers has filed for bankruptcy.

The Reed Property Trust, which held a ‘three star’ rating from S&P, was placed ‘on hold’ because Lehman Brothers had a 40 per cent stake in the trust’s operator, Reed Property Group Consolidated.

Lehman Brothers had intended to provide the trust with a working capital facility, some of which would be used to underwrite equity in the fund and reduce gearing over the next year.

S&P said it was not currently in a position to determine the impact of the Lehman Brothers collapse on the trust, and that the ‘on hold’ status would remain in place until the group’s ownership structure and the nature of the working capital facility had been clarified.

Another research house, Adviser Edge, also announced that it had placed the Reed Property Trust ‘on hold’, claiming that the loss of the Lehman facility would make it vulnerable to a softening in cap rates or a slowdown in investor inflows.