Johannesburg, 18 December 2014: Global Credit Rating Co. (Pty) Ltd (‘GCR’) has affirmed the final, public long term ‘A+(ZA)’ rating accorded to the following Senior Secured Notes (the ‘Senior Secured Notes’) issued by Delta Property Fund Limited (the ‘Issuer’) on the 9th of December 2013, under its R2bn DMTN Programme (the ‘Transaction’):
-ZAR 362m, Senior Secured Floating Rate Notes, maturing 09 December 2016, stock code DLTB02: A+(ZA);……Outlook ‘Stable’.
The Senior Secured Notes issued under the Issuer’s R2bn DMTN Programme were arranged by Nedbank Capital, a division of Nedbank Limited. The rating of the Senior Secured Notes was derived by applying a notching up approach, starting from the long term corporate credit rating of the Issuer. Based on fundamentals and prospects of the Issuer, GCR has accorded a long term ‘BBB+(ZA)’ long term national scale corporate credit rating with a ‘Stable’ outlook to the Issuer. A rating uplift of 3 national scale notches was deemed appropriate in this particular transaction, given the “Excellent Recovery Prospects” equating to a ‘A+(ZA)’ rating on the Senior Secured Notes. The rating relies on the recoveries from the properties contained within the security portfolio, which are largely offices predominately occupied by Government, with some diversification benefits drawn from the inclusion of a shopping mall and a number of industrial properties.
The rating accorded to the Senior Secured Notes relates to ultimate payment of the principal and interest (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity). If the ratings accorded to the Issuer change, the rating of the Senior Secured Notes may also change, but potentially not in the same scale. The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties. For more information on the Transaction, please read GCR’s Delta Property Fund Limited R362m Senior Secured Floating Rate Notes Surveillance Report to be issued in December 2014.
NATIONAL SCALE RATINGS HISTORY
Initial rating (December/2013)
DLTB02 Notes: A+(ZA)
Last rating (December/2014)
DLTB02 Notes: A+(ZA)
+27 11 784 1771
Sector Head: Structured Finance Ratings
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
- Global Structurally Enhanced Corporate Bonds Rating Criteria (Oct’14);
- Criteria for Rating Property Funds (Jul’14);
- Criteria for Rating Corporate Entities (Aug’14);
- Delta Property Fund Limited’s Corporate Rating Report (Aug’14);
- Delta Property Fund Limited R362m Senior Secured Floating Rate Notes – New Issuance Report (Dec’14).
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY
|Average Life||The average lifetime of an asset or obligation. Typically measured from origination to cancellation or termination date.|
|Capital Markets||The part of a financial system concerned with raising capital by dealing in shares, bonds, and other long-term debt securities.|
|Cash Flow||A financial term for monetary changes in operations, investing and financing activities.|
|Corporate Credit Rating||A credit rating accorded to a corporate entity.|
|Credit Rating||A rating accorded to the performance of either ultimate or timely payment of obligations.|
|Credit Rating Agency||A party that provides an opinion on the credit quality of assets, debt securities and companies.|
|Credit Risk||The probability or likelihood that a borrower will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred).|
|EBITDA||Earnings before interest, taxes, depreciation and amortisation.|
|Floating Rate Notes||Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR.|
|JIBAR||Johannesburg Interbank Agreed Rate. A reference rate.|
|Legal Opinion||An opinion regarding the validity and enforceable of a transaction’s legal documents.|
|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.|
|Liquidity Risk||The risk that a financial instrument cannot be traded on its market price due to the size of the market.|
|Long Term Rating||A credit rating based on the opinion of the ability to repay long term (more than a year) obligations.|
|Negative Pledge||A pledge made by a creditor that it will not incur any debt or event that may negatively impact the transaction or entity or material subsidiary.|
|Owner Trust||Owner of a securitisation vehicle that acts in the best interest of the Noteholders.|
|Paying Agent||An appointed transaction party that is responsible for the payment of Noteholders scheduled interest and principal, as well as other transactional obligations.|
|Property||Movable or immovable asset.|
|Rated Securities||Debt securities that have been accorded a credit rating.|
|Rating Outlook||A Rating Outlook indicates the potential direction of a rating over the medium term, typically a one to two years period. An outlook may be defined as; ‘Stable’ (nothing to suggest that the rating will change), ‘Positive’ (the rating symbol may be raised), ‘Negative’ (the rating symbol may be lowered) or ‘Evolving’ (the rating symbol may be raised or lowered).|
|Real Estate||Property that consists of land and / or buildings.|
|Reference Rate||A rate that is the basis of the calculation such as JIBAR.|
|Scheduled Interest||The interest payment due on a scheduled date.|
|Securitisation Vehicle||A Special Purpose Vehicle that has been created to guarantee the performance of the obligations of the Issuer that sold its assets to the Guarantee SPV.|
|Special Purpose Vehicle||A Special Purpose Vehicle that has been created to guarantee the performance of the obligations of the Issuer that sold its assets to the Guarantee SPV.|
|Stock Code||A unique code allocated to a publicly listed security.|
|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.|
|Unsecured Claim||Unsecured debt.|
|Weighted Average||An average resulting from the multiplication of each component by a factor reflecting its importance or, relative size to a pool of assets or liabilities.|
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 credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating.
The information received from the Arranger and other reliable third parties to accord the credit ratings included the latest Issuer’s audited annual financial statements for the year ending February 2014; the interim financials for the period ended 31 August 2014; an overview of the property portfolio serving as security for the Senior Secured Notes as per 1 December 2014; a performance forecast of the property portfolio serving as security for the Senior Secured Notes for the period beginning 1 January 2015 and 31 December 2015; the applicable Valuation Reports; and the relevant executed Transaction documents together with the relevant final signed legal and tax opinions and a letter confirming non-dual cession.
The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
GCR affirms the final, public long term ‘A+(ZA)’ rating accorded to Delta Property Fund Limited’s Senior Secured Notes.