Johannesburg, 31 August 2020 – GCR Ratings (“GCR”) has placed the national scale long and short-term issuer ratings assigned to Delta Property Fund Limited (“Delta”) of B-(ZA) and B(ZA) respectively on Rating Watch Negative.
|Rated Entity / Issue||Rating class||Rating scale||Rating||Outlook / Watch|
|Delta Property Fund Limited||Long Term issuer||National||B-(ZA)||Rating Watch Negative|
|Short Term issuer||National||B(ZA)|
The change in outlook to Rating Watch Negative is in response to Delta’s announcement dated 24 August 2020 that the long-standing Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have resigned with immediate effect. GCR considers that the resignations will further add to the uncertainty surrounding the group’s weak financial profile, particularly at a critical time in finalising long outstanding leases and renegotiating finance facilities. The sudden resignations also give rise to corporate governance concerns.
GCR has not updated or amended the core rating considerations as incorporated in the Delta rating updated published on 7 August 2020, to be found at: https://gcrratings.com/announcements/gcr-downgrades-delta-property-fund-limiteds-rating-to-b-za-due-to-a-decline-in-portfolio-metrics-arising-from-the-weaker-operating-environment/.
GCR will conduct a further review of Delta’s financial position and outlook once the new management team has been engaged.
Rating stability is dependent on the new management concluding the bulk leases and refinancing debt maturities.
A further increase in vacancies or deterioration in performance metrics would negatively impact operating income and property valuations, as well as Delta’s ability to meet debt obligations. Reduced funder support could also bring down the rating.
|Primary analyst||Eyal Shevel||Sector Head: Corporate Ratings|
|Johannesburg, ZA||Shevel@GCRratings.com||+27 11 784 1771|
|Committee chair||Yohan Assous||Sector Head: Structured Finance|
|Johannesburg, ZA||Yohan@GCRratings.com||+27 11 784 1771|
Related Criteria and Research
|Criteria for the GCR Ratings Framework, May 2019|
|Criteria for Rating Real Investment Trusts and Other Commercial Property Companies, May 2019|
|GCR Ratings Scales, Symbols & Definitions, May 2019|
|GCR Country Risk Scores, May 2020|
|GCR Corporate Sector Risk Scores, July 2020|
Rebosis Property Fund Limited
|Rating class||Review||Rating scale||Rating class||Outlook||Date|
|Long Term Issuer||Initial||National||BBB+(ZA)||Stable||July 2013|
|Short Term Issuer||Initial||National||A2(ZA)|
|Long Term Issuer||Last||National||B-(ZA)||Evolving Outlook||August 2020|
|Short term Issuer||Last||National||B(ZA)|
Risk Score Summary
|Rating Components and Factors||Risk Scores|
|Country risk score||7.00|
|Sector risk score||6.00|
|Management and governance||0.00|
|Leverage and capital structure||(2.00)|
|Total risk score||6.50|
|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.|
|Diversification||Spreading risk by constructing a portfolio that contains different exposures whose returns are relatively uncorrelated. The term also refers to companies which move into markets or products that bear little relation to ones they already operate in.|
|Interest||Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Leverage||With regard to corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.|
|Liquidity||The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.|
|Long Term Rating||See GCR Rating Scales, Symbols and Definitions.|
|Maturity||The length of time between the issue of a bond or other security and the date on which it becomes payable in full.|
|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.|
|Rating Outlook||See GCR Rating Scales, Symbols and Definitions.|
|REIT||Real Estate Investment Trust. A company that owns, operates or finances income-producing real estate.|
|Short Term Rating||See GCR Rating Scales, Symbols and Definitions.|
|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 POINTS OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument;.
The credit ratings have been disclosed to Delta Property Fund Limited. The ratings above were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.
Delta Property Fund Limited participated in the rating process through management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Delta Property Fund Limited and other reliable third parties to accord the credit ratings included:
- SENS announcement dated 24 August 2020.