Final ratings and outlooks accorded to the R450mln Senior Notes issued by Investec Property Fund
Johannesburg –13 April 2012:
Global Credit Ratings (“GCR”) has accorded final ratings and outlooks to the R450mln of Senior Notes issued by Investec Property Fund Limited (‘IPF’)
GCR has accorded final ratings of ‘A(RSA)(sf)’ and stable outlooks to the following senior secured notes (the ‘Senior Notes’) issued on 13 April 2012 by IPF (the ‘Issuer’):
• R134mln senior secured floating rate notes, stock code IPF01, coupon 3M Jibar + 1.4%, due 13 April 2015.
• R40mln senior secured floating rate notes, stock code IPF02, coupon 3M Jibar + 1.55%, due 13 April 2016.
• R50mln senior secured floating rate notes, stock code IPF03, coupon 3M Jibar + 1.65%, due 13 April 2017.
• R226mln senior secured fixed rate notes, stock code IPF06, coupon 8.8%, due 13 April 2017.
A portion of IPF’s property portfolio will serve as security for the R450mln Senior Notes (the ‘Transaction’). The Transaction entails the public listing of the Senior Notes on the Interest Rate Market of the Johannesburg Stock Exchange and forms part of a newly established R1bln Domestic Medium Term Note Programme. The listing of the Senior Notes is sponsored by Investec Bank Limited (‘Investec’). Investec also serves as the arranger for the Transaction.
The Transaction was analysed by calculating the estimated recoveries arising from an enforcement by Investec Property Fund Security SPV (Pty) Ltd (the ‘Security SPV’) of the underlying properties that serve as security for the benefit of the Senior Noteholders. Such security includes, amongst others, the registration of first ranking continuing coverage mortgage bonds (relating to the properties that have been chosen to serve as security in the Transaction) in favour of the Security SPV, the underlying lease agreements and any insurance proceeds relating to the properties that have been insured in the name of IPF.
The rating of the Senior Notes is derived by applying a notching approach, starting from the long term senior unsecured credit rating of IPF. In determining the appropriate number of rating notches to be applied, GCR compares the estimated overall recovery rate after a potential default of the Senior 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. Under such a scenario, the recovery prospects on the Senior Notes is deemed to be commensurate with a 2 notch national scale rating uplift from the long term senior unsecured corporate credit rating of IPF.
The rating accorded to the Senior Notes is a ZAR currency long term national scale rating. The rating accorded to the Senior Notes relates to 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. The rating of the Senior Notes incorporates recoveries potentially arising from the sale of the underlying collateral and can therefore not be compared with, for example, a traditional corporate credit rating (the latter typically refers to probability of default only). If the rating of the Issuer changes, the rating of the Senior Notes may also change, but not necessarily in the same quantum. The rating of the Senior Notes may also change if the estimated stressed value of the underlying collateral materially changes.
IPF is a recently established property loan stock company that listed on the JSE in April 2011. GCR has accorded IPF a ZAR currency national scale long term and short term corporate credit rating of ‘BBB+’ and ‘A2’ respectively. In according the corporate credit rating GCR noted, amongst others, the strong management team with extensive expertise within the real estate sector, as well as the significant shareholder support provided.
The new issue report entitled “Investec Property Fund Limited – R450mln Senior Secured Notes”, dated 13 April 2012, replaces the prefunding report published on 19 March 2012. The new issue report is available to subscribers of GCR’s structured finance subscription service. GCR analysed the Transaction by applying its Criteria for Rating Property Funds and Globally Structurally Enhanced Corporate Bonds Rating Criteria. The criteria reports are available at www.globalratings.net.
Rishentra Naidoo, Credit Analyst – Structured Finance, Johannesburg, firstname.lastname@example.org, +27 11 784 1771.
Alfons Ideler, Head of Structured Finance, Johannesburg, email@example.com, +27 11 784 1771.
Eyal Shevel, Head of Corporate Sector, Johannesburg, firstname.lastname@example.org, +27 11 784 1771.
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