Announcements

GCR Upgrades the Rating of Investec Property Fund’s Senior Secured Notes.

Johannesburg, 31 May 2016 — Global Credit Ratings (‘GCR’) has upgraded the final, public long term credit ratings of the following Senior Secured Notes issued by Investec Property Fund (‘IPF’), to ‘AA(ZA)’ with a ‘Stable’ Outlook:

  • R100,000,000 Senior Secured Notes, stock code IPF12, coupon 3M JIBAR + 1.50%, due 13 April 2018;
  • R50,000,000 Senior Secured Notes, stock code IPF03, coupon 3M JIBAR + 1.65%, due 13 April 2017; and
  • R226,000,000 Senior Secured Notes, stock code IPF06, fixed coupon 8.8%, due 13 April 2017.

Collectively the IPF12, IPF03 and IPF06 notes, amounting to R376m, issued under IPF’s DMTN programme (the ‘Transaction’) are referred to as the ‘Senior Secured Notes’. The IPF02 (R40m) notes issued on 13 April 2012 were redeemed upon maturity in April 2016.

The final, public ratings accorded to the Senior Secured Notes relate to ultimate payment of interest and principal (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity).

RATING RATIONALE

IPF is a limited liability Real Estate Investment Trust (‘REIT’) whose mandate is to procure and manage income generative real estate with potential for capital gain. Listed on the JSE in April 2011, the fund owns a range of retail, commercial and industrial properties. The recent acquisition of the R7.1bn Zenprop portfolio and the R826m Griffin transaction increased the value of investments to c.R17.0bn (FYE15: R8.7bn), placing the REIT on the upper end of middle tier domestic REITs in terms of scale.

As per the Irrevocable Letter of Undertaking issued to the Noteholders of the Senior Secured Notes, IPF have replaced the Montague Gardens property that was released from the Security Portfolio with two other properties (Unitrans Polokwane and Intercare Fourways). The properties are rated B and A respectively and bring further geographical and sectoral diversification to the portfolio. Resultantly, the Security Portfolio equated to R1.0bn after the inclusion and the April 2016 Valuations.

The rating of the Senior Secured Notes was derived by applying a notching up approach, starting from the long term senior unsecured corporate credit rating of the Issuer. Based on the fundamentals and prospects of IPF, GCR accorded the Issuer with Credit Ratings of ‘A(ZA)/A1(ZA)’ on the long and short term scale respectively, with a ‘Stable’ Outlook in August 2015. With regards to the Senior Secured Notes, a rating uplift of 3 national scale notches was deemed appropriate for this particular Transaction, given the ‘Excellent Recovery Prospects’ equating to a ‘AA(ZA)’ rating on the Notes.

For more information on the Transaction and specific details of the Senior Secured Notes, please refer to the “Investec Property Fund Limited R376m Senior Secured Notes – Surveillance Report”, to be published on 31 May 2016. The Surveillance Report will be available to subscribers of GCR’s structured finance subscription service.

NATIONAL SCALE RATINGS HISTORY

Stock Code
Initial Rating
Long Term Rating
Short Term Rating
Outlook
IPF12
15 April 2015
AA-(ZA)
n.a
Stable
IPF03
13 April 2012
A(ZA)
n.a
Stable
IPF06
13 April 2012
A(ZA)
n.a
Stable
Stock Code
Last Rating
Long Term Rating
Short Term Rating
Outlook
IPF12
15 April 2015
AA-(ZA)
n.a
Stable
IPF03
15 April 2015
AA-(ZA)
n.a
Stable
IPF06
15 April 2015
AA-(ZA)
n.a
Stable

ANALYTICAL CONTACTS

Mark Vrdoljak

Credit Analyst

+27 11 784 1771

markvrd@globalratings.net

Tinashe Mujuru

Junior Analyst

+27 11 784 1771

tinashem@globalratings.net

Committee Chairperson

Omega Collocott

Sector Head: Financial Institutions

+27 11 784 1771

omegac@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

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

Bond A long term debt instrument issued by either: a company, institution or the government to raise funds.
Capital The sum of money that is used to generate proceeds.
Corporate Credit Rating A credit rating accorded to a corporate entity.
Coupon Interest payment on a security.
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
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 Risk The probability or likelihood that a borrower or issuer will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred).
Debt An obligation to repay a sum of money.
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.
Floating Rate Notes Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR.
Irrevocable Not able to be changed, reversed, recovered and final.
Issuer The party indebted or the person making repayments for its borrowings.
JIBAR Johannesburg Interbank Agreed Rate. A reference rate.
JSE Johannesburg Stock Exchange Limited, a licenced exchange under the Securities Services Act of 2004 (South Africa).
Long Term Rating A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.
Loss A tangible or intangible, financial or non-financial loss of economic value.
National Scale Rating The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.
Notching A movement in ratings.
Noteholder Investor of capital market securities.
Obligation The title given to the legal relationship that exists between parties to an agreement when they acquire personal rights against each other for entitlement to perform.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Property Movable or immovable asset.
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.
Reference Rate A rate that is the basis of the calculation such as JIBAR.
Release An agreement between the creditor and debtor, in terms of which the creditor release the debtor from its obligations.
Security An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.
Senior A security that has a higher repayment priority than junior securities.
Servicing The calculation of interest and repayments, collection of repayments, advancing of loans, foreclose procedures, maintaining records and seeing that the proceeds of each loan are passed on to the respective party.
Short Term Rating A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.
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.
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.
Trust Deed A deed of conveyance creating and setting out the conditions of a trust.
Ultimate Payment A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.
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 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 Issuer and the Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.

The credit ratings have been disclosed to the Issuer and the Arranger with no contestation of the ratings.

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 31 March 2015; reviewed preliminary condensed consolidated financial statements relating to the Issuer per 31 March 2016; independent property valuations on all six properties as at 31 March 2016; a signed final legal opinion prepared in April 2015; tenant lease schedules for the secured properties; tenant and building gradings relating to the secured properties; the insurance policies covering the secured properties and a letter confirming that no properties (securing the Noteholder obligations) have been dual ceded.

image_pdf

Leave a Reply



ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.