Determinants of listed property trust bond ratings : Australian evidence

Using artificial neural networks (ANN) and ordinal regression (OR) as alternative methods to predict LPT bond ratings, we examine the role that various financial and industry variables have on Listed Property Trust (LPT) bond ratings issued by Standard and Poor’s from 1999-2006. Our study shows that both OR and ANN provide robust alternatives to rating LPT bonds and that there are no significant differences in results between the two full models. OR results show that of the financial variables used in our models, debt coverage and financial leverage ratios have the most profound effect on LPT bond ratings. Further, ANN results show that 73.0% of LPT bond rating is attributable to financial variables and 23.0% to industry-based variables with office LPT sector accounting for 2.6%, retail LPT 10.9% and stapled management structure 13.5%.