Announcements Rating Alerts Structured Finance

GCR assigns ‘AA-(ZA)(EL)’ ratings to New Notes and affirms ratings of Existing Notes issued by Accelerate Property Fund Ltd. Outlook Stable

Rating Action

Johannesburg, 4 October 2019 – GCR Ratings (“GCR”) has assigned long-term credit ratings of ‘AA-(ZA)(EL)’, with a Stable outlook to the following Senior Secured APF10 and APF11 Notes (the “New Notes”) issued by Accelerate Property Fund Ltd (“Accelerate”, or the “Issuer”) under the Issuer’s R5bn Domestic Medium Term Note Programme (the “Programme”).

Security Class Stock Code Amount Rating class Rating scale Rating Outlook Maturity Date
Senior Secured Notes APF10 R156,000,000 Issue Long Term National AA-(ZA)(EL) Stable Sep 2022
Senior Secured Notes APF11 R129,000,000 Issue Long Term National AA-(ZA)(EL) Stable Sep 2020

Concurrently, GCR affirmed the long-term credit ratings and rating outlooks assigned to the following Senior Secured Notes (the “Existing Notes”) that were previously issued.

Security Class Stock Code Amount Rating class Rating scale Rating Outlook Maturity Date
Senior Secured Notes APF04 R225,000,000 Issue Long Term National AA-(ZA)(EL) Stable Oct 2021
Senior Secured Notes APF05 R325,000,000 Issue Long Term National AA-(ZA)(EL) Stable Aug 2020
Senior Secured Notes APF06 R200,000,000 Issue Long Term National AA-(ZA)(EL) Stable Aug 2022
Senior Secured Notes APF07 R150,000,000 Issue Long Term National AA-(ZA)(EL) Stable Jun 2023
Senior Secured Notes APF08 R279,000,000 Issue Long Term National AA-(ZA)(EL) Stable Jul 2021
Senior Secured Notes APF09 R321,000,000 Issue Long Term National AA-(ZA)(EL) Stable Jul 2023

The Senior Secured Notes listed above are collectively referred to as the “Senior Secured Notes”.

The entire proceeds from the issuance of the New Notes were used to refinance the R285m of Senior Secured APF02 Notes which matured on 26 September 2019. The ratings of the APF02 Notes were withdrawn.

Security Class Stock Code Amount Rating class Rating scale Rating Outlook Maturity Date
Senior Secured Notes APF02 R285,000,000 Issue Long Term National WD(ZA) Sep 2019

Structured bond ratings are based on an estimate of the expected loss in the event of an issuer default and are a function of the estimated probability of default of the issuer and the potential losses that may be incurred. As such, the ratings carry an ‘EL’ suffix.

Rating Rationale

The Senior Secured Notes, together with the Permitted Term Facilities and Permitted Hedging Facilities, are currently secured against 32 of the properties held by the Issuer (the “Secured Properties”), with an aggregate open market value (“OMV”) of R6.9 bn at June 2019. The Senior Secured Noteholders, the Permitted Term Facility Providers and the Permitted Hedging Facility Counterparty (collectively the “Secured Lenders”) will share pro rata in the underlying security (being the first ranking mortgages in favour of the Security SPV over the Secured Properties and a cession of all the Issuer’s lease agreements and insurance policies relating to the Secured Properties). The composition of the Secured Properties pool is subject to change from time to time as the Issuer removes and/or adds properties.

The Secured Properties portfolio has significant concentration towards two properties (Cedar Square and Fourways Mall), which comprise 59.2% of its latest independent OMV. This is expected to increase post the development which is currently taking place in the Fourways node. Nevertheless, 10.2% of the Secured Properties portfolio comprises office buildings, with a further 2.3% of industrial properties to complement the predominantly retail portfolio (87.5%).

GCR affirmed the Issuer’s unsecured debt local currency national scale credit ratings of ‘BBB+(ZA)’ and ‘A2(ZA)’ on the long- and short-term national scales respectively, with a Stable outlook, in August 2019.

The rating of the Senior Secured Notes is derived by applying a notching approach, starting from the long term senior unsecured credit rating of the Issuer. A rating uplift of four national scale notches was still deemed appropriate for the transaction, given the “Superior Recovery Prospects” output of GCR’s recovery rate model, where secured debt is modelled at covenant level. Should the Issuer rating, or the overall estimated recovery rate calculated by GCR change, the ratings accorded to the Senior Secured Notes may also change.

Analytical contacts

Primary analyst Tinashe Mujuru Structured Finance Analyst
Johannesburg, ZA TinasheM@GCRratings.com +27 11 784 1771
Secondary analyst Yehuda Markovitz Structured Finance Analyst
Johannesburg, ZA YehudaM@GCRratings.com +27 11 784 1771
Committee chair Yohan Assous Sector head: Structured Finance Ratings
Johannesburg, ZA Yohan@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for Rating Structured Bonds, November 2018
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Real Estate Investment Trusts and Other Commercial Property Companies, updated May 2019
GCR’s Country Risk Score report, published June 2019
GCR’s Corporate Sector Risk Score reports/Market Alerts, published July 2019
GCR’s Industry Research on the SA Commercial Property Market, July 2019
Accelerate Property Fund Limited Senior Secured Notes New Issuance Report, published July 2018
Accelerate Property Fund Limited Rating Announcement, published August 2019

Ratings history

Accelerate Property Fund Limited Senior Secured Notes

Security class Stock code Rating scale Rating * Outlook/Watch Initial Rating Date
Senior Secured Notes APF02 National AA-(ZA) Stable Oct 2014
Senior Secured Notes APF04 National AA-(ZA) Stable Oct 2016
Senior Secured Notes APF05 National AA-(ZA) Stable Aug 2017
Senior Secured Notes APF06 National AA-(ZA) Stable Aug 2017
Senior Secured Notes APF07 National AA-(ZA) Stable Jun 2018
Senior Secured Notes APF08 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF09 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF10 National AA-(ZA)(EL) Stable Oct 2019
Senior Secured Notes APF11 National AA-(ZA)(EL) Stable Oct 2019
Security class Stock code Rating scale Rating * Outlook/Watch Last Rating Date
Senior Secured Notes APF02 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF04 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF05 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF06 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF07 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF08 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF09 National AA-(ZA) Stable Jul 2018
Senior Secured Notes APF10 National AA-(ZA)(EL) Stable Oct 2019
Senior Secured Notes APF11 National AA-(ZA)(EL) Stable Oct 2019

* Prior to the publication of GCR’s Rating Scales, Symbols and Definitions in May 2019, structured bond ratings did not carry the ‘EL’ suffix.

Glossary of Terms/Acronyms

Agreement A negotiated and usually legally enforceable understanding between two or more legally competent parties.
Bond A long-term debt instrument issued by either a company, institution or the government to raise funds.
Cession Amount of the insurance ceded to a reinsurer by the original insuring company (cedant) in a reinsurance transaction.
Corporate Credit Rating A credit rating accorded to a corporate entity.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
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 90 days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.
Domestic Medium Term Note Programme 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.
Expected Loss Losses that a bank expects to bear over a certain period (generally a year). These losses are a consequence of doing business, namely the bank’s role as financial intermediary.
Facility The grant of availability of money at some future date in return for a fee.
Gross Lettable Area GLA is the portion of the total floor area of a building that is available for tenant leasing, and is usually expressed in square meters or square feet.
Hedging The act of managing risk, aimed at mitigating financial loss or other adverse circumstances. May include taking an offsetting position in addition to an existing position. The correlation between the existing and offsetting position is negative.
Insurance Provides protection against a possible eventuality.
Issuer The party indebted or the person making repayments for its borrowings.
Lease Conveyance of land, buildings, equipment or other assets from one person (lessor) to another (lessee) for a specific period of time for monetary or other consideration, usually in the form of rent.
Lender A credit provider that is owed debt obligations by a debtor.
Loss 1. A tangible or intangible, financial or non-financial loss of economic value. 2. The happening of the event for which insurance pays (insurance).
Market An assessment of the property value, with the value being compared to similar properties in the area.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Notching A movement in ratings.
Noteholder Investor of capital market securities.
Pool An organisation of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed-upon amounts.
Portfolio A collection of investments held by an individual investor or financial institution. They may include stocks, bonds, futures contracts, options, real estate investments or any item that the holder believes will retain its value.
Pro Rata (1) Distribution of the amount of insurance under one policy among several objects or places covered in proportion to their value or the amounts shown. (2) Distribution of liability among several insurers having policies on a risk, usually in the proportion that the amount of coverage in each policy bears to the total amount of coverage in all policies.
Probability The likelihood or relative frequency of an event expressed in a number between zero and one. The throw of a die is an example. The probability of throwing five is found by dividing the number of faces that have a five (1) by the total number of faces (6). That is a probability of one-sixth or one divided by six, which is .17. See also Degree of Risk, Law of Large Numbers, and Odds.
Proceeds Funds from issuance of debt securities or sale of assets.
Property Movable or immovable asset.
Ranking A priority applied to obligations in order of seniority.
Rating Outlook See GCR Rating Scales, Symbols and Definitions.
Real Estate Investment Trust A REIT is a company that owns or finances income-producing real estate. REITs are subject to special tax considerations and generally pay out all of their taxable income as distributions to shareholders.
Real Estate Property that consists of land and / or buildings.
Recovery The action or process of regaining possession or control of something lost. To recoup losses.
Refinance The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.
Secured Debt Debt backed with or secured by collateral to reduce lending risk and thus the interest rate charged.
Security One of various instruments used in the capital market to raise funds.
Senior A security that has a higher repayment priority than junior securities.
Short Term Current; ordinarily less than one year.
Stock Code A unique code allocated to a publicly listed security.
Structured Bond Ratings See GCR Rating Scales, Symbols and Definitions.
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.
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.
Trust A third party that acts in the best interest of another party, according to the trust deed, usually the investors. Owner of a securitisation vehicle that acts in the best interest of the Noteholders.
Valuation An assessment of the property value, with the value being compared to similar properties in the area.

Salient Points 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 ratings are for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The credit ratings have been disclosed to Issuer and Administrator. The ratings above were solicited by, or on behalf of, the Issuer, and therefore, GCR has been compensated for the provision of the ratings.

Issuer participated in the rating process via teleconferences and/or other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Issuer and other reliable third parties to accord the credit ratings included:

  • Applicable Pricing Supplements for the New Notes;
  • Legal Opinions relating to the issuance of the New Notes;
  • Latest external property valuation reports;
  • Secured Properties net income report;
  • Vacancy and arrear levels per property as at July 2019, and
  • Covenant compliance certificates dated September 2019.


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