Announcements Rating Alerts Structured Finance

GCR revises the Emira Property Fund Secured Notes ratings to ‘AA+(ZA)(EL)’ on criteria change, with a Stable outlook.

Rating Action

4 October 2019 – GCR Ratings (“GCR”) has revised the following public long-term credit ratings accorded to the Senior Secured Floating Rate Notes issued by Emira Property Fund Limited (“Emira”, or the “Issuer”) to ‘AA+(ZA)(EL)’ with a ‘Stable’ outlook:

Security Class Stock Code Amount Rating class Rating scale Rating Outlook / Watch
Senior Secured EPF007 R70,000,000 Issue Long Term National AA+(ZA)(EL) Stable
Senior Secured EPF016 R130,000,000 Issue Long Term National AA+(ZA)(EL) Stable
Senior Secured EPF017 R200,000,000 Issue Long Term National AA+(ZA)(EL) Stable
Senior Secured EPF018 R100,000,000 Issue Long Term National AA+(ZA)(EL) Stable

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. The ‘EL’ suffix indicates that the ratings differ from institutional or structured finance ratings.

Rating Rationale

Following the introduction of the new Criteria for the GCR Ratings Framework, and the Criteria for Rating Real Estate Investment Trusts and Other Commercial Property Companies, both published in May 2019, the unsecured rating of the Issuer was reviewed and the outlook revised to ‘Stable’ from ‘Negative’ in July 2019. The corporate’s rating outlook was revised to ‘Stable’ to reflect the strong occupancy levels, competitive rental rates and escalations, as well as the positive impact of the international diversification evident in Emira’s portfolio. Concurrent with the release of the new criteria, GCR revised and released an updated South African national to international scale mapping table (within GCR’s Anchor Credit Evaluator Table).

At June 2019, the secured property portfolio exhibited a low vacancy rate of 2.9% and arrears that were below 1.0%. The aggregate independently performed open market value of the secured portfolio remained stable at R1.3bn, given the Issuer’s rotation policy, which results in each of its properties being independently valued once every three years. Although the loan to value ratio was maintained below the 40% covenant, GCR calculated a ratio of 39.7% based on the outstanding debt and the most recent independent property valuations at June 2019.

In line with GCR’s Criteria for Rating Structured Bonds, the ratings assigned to the Senior Secured Notes are derived by applying a notching approach, starting from the Issuer’s rating. Based on the consistently high estimated recovery rates from the secured property portfolio which qualify as “Excellent Recovery Prospects”, as well as the update in respect of the national to international scale mapping table, a four-notch rating uplift on the national scale is deemed appropriate for this transaction. As such, the ratings of the Notes have been revised by a single notch to ‘AA+(ZA)(EL)’ with a ‘Stable’ outlook. Should the unsecured rating assigned to Emira or the overall estimated recovery rate from the secured property portfolio change, then the rating assigned 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 Gary Nyoni Structured Finance Analyst
Johannesburg, ZA GaryN@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, 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
Emira Property Fund Limited Corporate Rating Report, July 2019
Emira Property Fund Limited Senior Secured Notes New Issuance Report, December 2018

Ratings History

Emira Property Fund Senior Secured Notes

Security class Stock code National Long-Term Rating* Outlook Initial Rating
Senior Secured EPF007 AA(ZA) Stable Aug. 2015
Senior Secured EPF016 AA(ZA) Negative Sep. 2018
Senior Secured EPF017 AA(ZA) Negative Sep. 2018
Senior Secured EPF018 AA(ZA) Negative Dec. 2018
Security class Stock code National Long-Term Rating* Outlook Last Rating
Senior Secured EPF007 AA(ZA) Negative Dec. 2018
Senior Secured EPF016 AA(ZA) Negative Dec. 2018
Senior Secured EPF017 AA(ZA) Negative Dec. 2018
Senior Secured EPF018 AA(ZA) Negative Dec. 2018

* 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.
Amortisation From a liability perspective, the paying off of debt in a series of instalments over a period of time. From an asset perspective, the spreading of capital expenses for intangible assets over a specific period of time (usually over the asset’s useful life).
Applicable Pricing Supplement A transaction document that describes the particulars of notes issued.
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.
Asset A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.
Assets A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.
Capital The sum of money that is invested to generate proceeds.
Cash Funds that can be readily spent or used to meet current obligations.
Credit Rating Agency An entity that provides credit rating services.
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 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
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.
Enforcement To make sure people do what is required by a law or rule et cetera.
Interest Rate The charge or the return on an asset or debt expressed as a percentage of the price or size of the asset or debt. It is usually expressed on an annual basis.
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.
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.
National Scale Rating National scale ratings measure creditworthiness relative to issuers and issues within one country.
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.
Prepayment Any unscheduled or early repayment of the principal of a mortgage/loan.
Pricing A process of determining the price of a debt security.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Provision The amount set aside or deducted from operating income to cover expected or identified loan losses.
Public Ratings See GCR Rating Scales, Symbols and Definitions.
Rating Outlook See GCR Rating Scales, Symbols and Definitions.
Recovery The action or process of regaining possession or control of something lost. To recoup losses.
Redemption The repurchase of a bond at maturity by the issuer.
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.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
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.
Servicer A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.
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.
Surveillance Process of monitoring a transaction according to triggers, covenants and key performance indicators.
Timely Payment The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.
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.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the ratings 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; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The credit ratings have been disclosed to the Issuer. 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.

The Issuer participated in the rating process via face-to-face 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 the Arranger and other reliable third parties to accord the credit ratings included:

  • Updated internal and external property valuations as at June 2019;
  • One ear trading forecast for the secured properties from August 2019;
  • Property vacancies and arrears at June 2019; and
  • Tenancy schedules as at June 2019.


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