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CommonWealth REIT
today noted that on March 7, 2014, Moody's
Investors Service announced that it was placing CWH's investment grade ratings
“on review for downgrade,” which would affect approximately $2 billion of CWH
securities. In a press release regarding CWH, Moody's stated:
“Moody's Investors Service placed the ratings of CommonWealth REIT on review
for downgrade reflecting the potential for significant shifts in financial and
strategic policies as a result of the activist shareholders' efforts to
displace the current Board of Directors and management…..If the activist
shareholders are successful, Moody's will focus on potential for increased
leverage, secured debt and/or core asset sales, as well as execution risk
associated with transitioning the operations of a large, nationally diverse
real estate portfolio to a new management team and infrastructure.”
CWH believes Moody's action confirms that there are significant risks for CWH
shareholders if Related Fund Management, LLC and Corvex Management LP
(“Related/Corvex”) are successful in removing the entire CWH Board without
cause. It appears that Related/Corvex's plan for CWH is to sell CWH's best
performing assets, increase leverage and buyback stock.
Adam Portnoy, President and Managing Trustee of CWH, made the following
statement regarding Moody's announcement:
“The CWH Board is disappointed, but not surprised, by Moody's decision to
place CWH on review for downgrade because of Related/Corvex's short term
scheme for CWH. Moody's announcement validates our long held belief that the
Related/Corvex plan for CWH is nothing more than a financial engineering
scheme designed to increase CWH's share price in the short term at the expense
of long term shareholder value. In addition to clearly putting CWH's
investment grade debt ratings at risk, the scheme proposed by Related/Corvex
will also likely put CWH's dividends at risk.
“We also believe that Related/Corvex's effort to remove the entire Board by
written consent, and without cause, creates serious and unnecessary risks to
CWH's business. The far better and less disruptive course is for shareholders
to participate in the CWH annual shareholders' meeting on June 13, 2014. The
fact that Related/Corvex are willing to proceed in this reckless manner
demonstrates that their goal is to seize immediate control of CWH at any cost,
and has little or nothing to do with corporate governance or the best
interests of all other shareholders.”
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