Johannesburg, 19 August 2015 — Global Credit Ratings (“GCR”) has accorded a final, public long term credit rating of ‘AA(ZA)’ with a Stable Outlook to the EPF006 and EPF007 Senior Secured Floating Rate Notes (the ‘New Group 1 Notes’) mentioned above. The New Group 1 Notes were issued on 19 August 2015 (the ‘Transaction’) as Tranche 1 of Series 21 and Series 22 to redeem the EPF001 Notes previously issued on 19 August 2011.
The final, public ratings accorded to the New Group 1 Notes relates to the ultimate payment of interest and principal (as opposed to timely, akin to a loss severity rating therefore). The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties.
RATING RATIONALE
The ratings of the New Group 1 Notes are derived by applying a notching approach, starting from the Long Term senior unsecured credit rating of Emira. In determining the appropriate number of rating notches to be applied, GCR compares the estimated overall recovery rate after a potential default of the New Group 1 Notes with an assumed average corporate senior unsecured debt obligation recovery rate. If overall estimated recoveries are higher than the assumed average recovery rate, a notching uplift may be applicable.
Based on GCR’s Global Structurally Enhanced Corporate Bonds Rating Criteria, the calculated overall recovery rate of 99.4% carries the qualification “Excellent Recovery Prospects”. A three notch rating uplift on the national scale is deemed to be appropriate for the Transaction. Accordingly, GCR has accorded the final, public ‘AA(ZA)’ rating with a Stable Outlook to the New Group 1 Notes that will be used to redeem the EPF001 Notes previously issued on 19 August 2011.
RATINGS HISTORY
| Stock code | ||||
| EPF006 | ||||
| EPF007 | ||||
| Stock code | ||||
| EPF006 | ||||
| EPF007 |
ANALYTICAL CONTACTS
Corné Els
Structured Finance Analyst
+27 11 784 1771
Committee Chairperson
Eyal Shevel
Sector Head: Corporate & Public Sector Debt Ratings
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structurally Enhanced Corporate Bonds Rating Criteria – Oct ’14;
Global Master Criteria for Rating Corporate Entities – Feb ’15;
Global Summary Criteria for Rating Property Funds – Apr ’15;
Emira Property Fund Corporate Analysis Report – Apr ’15; and
Emira Property Fund Limited New Group 1 Notes Prefunding Report – Aug ’15.
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.NET/RATINGS-INFO. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.
| Agent | An agreement where one party (agent) concludes a juristic act on behalf of the other (principal). The agent undertakes to perform a task or mandate on behalf of the principal. |
| Agreement | A negotiated and usually legally enforceable understanding between two or more legally competent parties. |
| Arranger | Usually an Investment bank that advises and constructs a transaction and acts as a conduit between the transaction parties: Client, Issuer, Credit Rating Agency, Investors, Legal Counsel and Servicers. |
| Bond | A long term debt instrument issued by either: a company, institution or the government to raise funds. |
| Claim | A formal request or demand. |
| Conduit | A commercial lending entity that is established to purchase assets to securitise. |
| Credit | A contractual agreement in which a borrower receives something of value now, and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company |
| Credit Rating | An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories. |
| Credit Rating Agency | An entity that provides credit rating services. |
| Credit Risk | The probability or likelihood that a borrower or issuer will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred). |
| Creditworthiness | An assessment of a debtor’s ability to meet debt obligations. |
| Debt | An obligation to repay a sum of money. |
| Debtor | The party indebted or the person making repayments for its borrowings. |
| Default | A default occurs when: 1.) The Borrower is unable to repay its debt obligations in full; 2.) A credit-loss event such as charge-off, specific provision or distressed restructuring involving the forgiveness or postponement of obligations; 3.) The borrower is past due more than X days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors. |
| Enforceable | To make sure people do what is required by a law or rule et cetera. |
| Floating Rate Notes | Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR. |
| Forecast | A calculation or estimate of future financial events. |
| Issuer | The party indebted or the person making repayments for its borrowings. |
| JIBAR | Johannesburg Interbank Agreed Rate. A reference rate. |
| Lease | Agreement or temporary use and enjoyment of a corporeal thing (movable or immovable property) the whole or part thereof for rent. The essential elements of a contract of lease are: 1.) Undertaking of lessor to give the lessee the use and enjoyment of something; 2.) Agreement between the lessor and lessee that the lessee’s right to use and enjoyment is temporary; and 3.) Lessee’s undertaking to pay a sum or rent. |
| Lender | A credit provider that is owed debt obligations by a debtor. |
| Lessee | The party that enjoys temporary use of a corporeal thing. |
| Lessor | The owner or agent that acts on behalf of the owner of property that grants the temporary use of a corporeal thing. |
| Liability | All financial claims, debts or potential losses incurred by an individual or an organisation. |
| Lien | A right of retention of someone else’s property due to expensed money or labour on property acquires a lien until payment is made. A lien outranks all other forms of security claims. A lien arises by operation of law and not as agreement between parties. There are three types of liens: 1.) Storage or salvation of property; 2.) Improvement of property; and 3.) Contractual debt. |
| Liquidity | The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity. |
| Liquidity Risk | The risk that a company may not be able to meet its financial obligations or other operational cash requirements due to an inability to timeously realise cash from its assets. Regarding securities, the risk that a financial instrument cannot be traded at its market price due to the size, structure or efficiency of the market. |
| Loss | A tangible or intangible, financial or non-financial loss of economic value. |
| Market | An assessment of the property value, with the value being compared to similar properties in the area. |
| Notching | A movement in ratings. |
| Obligation | The title given to the legal relationship that exists between parties to an agreement when they acquire personal rights against each other for entitlement to perform. |
| Obligor | The party indebted or the person making repayments for its borrowings. |
| Principal | The total amount borrowed or lent, e.g. the face value of a bond, excluding interest. |
| Property | Movable or immovable asset. |
| Provision | An amount set aside for expected losses to be incurred by a creditor. |
| Ranking | A priority applied to obligations in order of seniority. |
| Recovery | The action or process of regaining possession or control of something lost. To recoup losses. |
| Reference Rate | A rate that is the basis of the calculation such as JIBAR. |
| Rent | Payment from a lessee to the lessor for the temporary use of an asset. |
| Repayment | Payment made to honour obligations in regards to a credit agreement in the following credited order: 3.) Satisfy the due or unpaid interest charges; 4.) Satisfy the due or unpaid fees or charges; and 5.) To reduce the amount of the principal debt. |
| Secured Debt | Debt backed with or secured by collateral to reduce lending risk and thus the interest rate charged. |
| Securities | Various instruments used in the capital market to raise funds. |
| Security | An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default. |
| Senior | A security that has a higher repayment priority than junior securities. |
| Senior Unsecured Debt | Securities that have priority ahead of all other unsecured or subordinated debt for the payment in the event of default. |
| Servicer | A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations. |
| Servicing | The calculation of interest and repayments, collection of repayments, advancing of loans, foreclose procedures, maintaining records and seeing that the proceeds of each loan are passed on to the respective party. |
| Structured Finance | A method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk. |
| Subordinated Debt | Debt that in the event of default is repaid only after senior obligations have been repaid. It is higher risk than senior debt. |
| Tranche | In a structured finance, a slice or portion of debt securities offered that is structured or grouped to resemble the same degree of risk associated with the underlying asset or with a similar degree of risk. A junior tranche has a higher degree of default risk than a senior tranche. |
| Transaction | A transaction that enables an Issuer to issue debt securities in the capital markets. A debt issuance programme that allows an Issuer the continued and flexible issuance of several types of securities in accordance with the programme terms and conditions. |
| Ultimate Payment | A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries. |
| Unsecured debt | Debt securities that have no collateral. |
| Valuation | An assessment of the property value, with the value being compared to similar properties in the area. |
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
The Issuer and the Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating.
The information received from the Issuer:
- 1 Year Trading Forecast;
- Tenancy Schedules as at July 2015;
- Rent Roll as at July 2015;
- Updated Property Valuations as at June 2015;
- Property Vacancies as at July 2015; and
- The Issuer’s Integrated Report for the year ended 30 June 2014.
