Johannesburg, 18 February 2015: Global Credit Rating Co. (Pty) Ltd (‘GCR’) has accorded a final, public long term ‘A(ZA)’ rating with a ‘Stable’ outlook to the following New Notes (the New Notes and the Existing collectively referred to as the ‘Senior Notes’) issued by Hospitality Property Fund Limited (the ‘Issuer’) on 18 February 2015 under the Issuer’s DMTN programme (the ‘Transaction’):
- ZAR 60m, Senior Secured Floating Rate Notes, maturing 18 February 2020, stock code…… HPF06.
- ZAR 80m, Senior Secured Floating Rate Notes, maturing 18 February 2020, stock code …… HPF07.
- ZAR 150m, Senior Secured Floating Rate Notes, maturing 17 April 2016, stock code…………. HPF01.
- ZAR 400m, Senior Secured Floating Rate Notes, maturing 17 February 2017, stock code…. HPF04.
- ZAR 200m, Senior Secured Fixed Rate Notes, maturing 17 February 2017, stock code………. HPF05.
Concurrently, GCR has affirmed the final, public long term rating of ‘A(ZA)’ with a ‘Stable’ outlook accorded to the Issuer’s Existing Notes issued on 17 April 2013, 17 February 2014 and 23 April 2014 respectively:
GCR has accorded the above credit rating(s) to Hospitality Property Fund’s Senior Notes based on the following key criteria:
The Senior Notes are secured by a portfolio of the Issuer’s hotels (the underlying collateral). The Transaction entails the public listing of the Senior Notes on the Interest Rate Market of the Johannesburg Stock Exchange and forms part of the Issuer’s established R2bn Domestic Medium Term Note Programme. The Transaction sponsor is Rand Merchant Bank (‘RMB’) (a division of First Rand Bank Ltd). RMB also serves as the Arranger amongst other roles for the Transaction.
Based on fundamentals and prospects of the Issuer in November 2014, GCR upgraded the long term, national scale, corporate Issuer credit rating to ‘BBB(ZA)’ with a ‘Stable’ outlook. 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 Transaction.
The final, public ratings accorded to the Senior 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). The ratings exclude an assessment of the ability of the Issuer to pay any (early repayment) penalties. If the ratings accorded to the Issuer change, the rating of the Senior Notes and the Tap Issuance Notes may change, but potentially not in the same scale. For more information on the Transaction, please read GCR’s New Issuance Report on this Transaction to be published on 18 February 2015.
NATIONAL SCALE RATINGS HISTORY
Senior Notes rating, HPF01, 17 Apr’13: A(ZA); Outlook: Stable
Senior Notes rating, HPF04, 17 Feb’14: A(ZA); Outlook: Stable
Senior Notes rating, HPF05, 23 Apr’14: A(ZA); Outlook: Stable
Senior Notes rating, HPF06, 18 Feb’15: A(ZA); Outlook: Stable
Senior Notes rating, HPF06, 18 Feb’15: A(ZA); Outlook: Stable
Last rating (April/2014)
Senior Notes rating, HPF01, 30 Apr’14: A(ZA); Outlook: Stable
Senior Notes rating, HPF04, 30 Apr’14: A(ZA); Outlook: Stable
Senior Notes rating, HPF05, 30 Apr’14: A(ZA); Outlook: Stable
Senior Notes rating, HPF06: N.a.
Senior Notes rating, HPF07: N.a.
+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),
- HPF Corporate Rating Report (Nov’14);
- Hospitality Property Fund Limited R750m Senior Secured Notes New-Issuance Report (Apr’14).;
- Criteria for Rating Corporate Entities (Aug’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.
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 rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
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 June 2014; an overview of the Issuer’s Hotels portfolio for the period ending 31 December 2014; a performance forecast for the period beginning December 2012 and ending December 2019; the insurance policies covering the hotels serving as security; the applicable Open Market Valuation Reports; and the relevant signed and executed transaction documentation together with the relevant legal and tax opinions.
|Applicable Pricing Supplement||A transaction document that describes the particulars of notes issued.|
|Bankruptcy Remote||A feature, through real security and guarantees that reduces the enforceability of a creditor against a Special Purpose Vehicle. Typically a Security Special Purpose Vehicle should be bankruptcy remote.|
|Business Rescue||A term under the Companies Act 71 of 2008 (South Africa) Chapter 6 to remedy an entity that is likely to become insolvent. Entities that are likely to become insolvent (where liabilities exceed assets) or unlikely to be able to pay their debts as they fall due and payable in the coming six months.|
|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 it’s 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.|
|Fair Value||Accounting term, a rational and unbiased estimate of the potential market price of a good, service or asset.|
|Fixed Interest||An interest rate that does not change as the repo or reference rate changes.|
|Floating Rate Notes||Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR.|
|Insolvency||A debtor unable to pay a judgement of debt or who cannot meet its financial obligations and does not have sufficient realisable assets that can be attached in satisfaction of judgement or obligations. The debtor can apply for an administration order interims of the Magistrates’ Court Act 32 of 1944 (South Africa).|
|Irrevocable||Not able to be changed, reversed, recovered and final.|
|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 it’s market price due to the size of the market.|
|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.|
|Pari Passu||Side by side; at the same rate or on an equal footing.|
|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.|
|Real Security||Obtained by a creditor when either as a consequence of agreement with a debtor or operation of law, the creditor acquires the right to be reimbursed from the proceeds of movable or immovable property of the debtor in the event of the debtor default.|
|Reference Rate||A rate that is the basis of the calculation such as JIBAR.|
|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.|
|Standard Deviation||An indication of risk amongst the dispersion of values. Higher value indicates greater risk.|
|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.|
|Tranche||In a structured finance, a slice or portion of debt securities offered that is structured or grouped to resemble the same degree of risk associated with the underlying asset or with a similar degree of risk. A junior tranche has a higher degree of default risk than a senior tranche.|
|Unsecured Claim||Unsecured debt.|
|Weighted Average||An average resulting from the multiplication of each component by a factor reflecting it’s importance or, relative size to a pool of assets or liabilities.|
Hospitality Property Fund Limited – Senior Secured Notes, new final, public rating accorded