Deutsche Bank Downgrades Brixmor To Hold, Uncertain About Company's Future

In a report issued Monday, Deutsche Bank analysts Vin Chao andGreg Schweitzer downgraded Brixmor Property Group Inc BRX from Buy to Hold and trimmed their price target by $7.00 to $24.00 "as accounting/misconduct questions remain."

The company held its quarterly earnings call on Monday, but provided few answers to the many questions that lingered.

"We simply don’t know the extent of the misconduct stemming from the Audit Committee’s review of what appears to be relatively immaterial ‘smoothing’ of reported SS NOI results dating back to 2013,” the research note said.

The analysts explained, however, that they were moving their rating to Hold because the accounting issues announced in the company have quite little relation with asset level fundamentals. In addition, a buyer could appear, as the Strip space has seen several times in the past.

Back to the company’s issues, the analysts highlighted that the company would not comment on the involvement of the resigned CEO, CFO, and CAO beyond what it had said in its press release.

While analysts believe that the Board is responding in an “effective and decisive manner,” and think that interim CEO Dan Hurwitz could provide some stabilization, they also believe that the company will need some time to work through the fallout.

Even though Brixmor said that it does not believe the problems will have an impact on compliance regarding its debt obligations, the analysts think “refinancing will be more challenging or, at a minimum, more expensive.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.