Johannesburg, 30 April 2014: Global Credit Rating Co. (Pty) Ltd (‘GCR’) has affirmed the final, public long term ‘A(ZA)’ ratings and ‘Stable’ Outlooks accorded to the following senior secured notes (the ‘Senior Secured Notes’) which were issued by Hospitality Property Fund Limited (the ‘Issuer’):
– ZAR 150m, Senior Secured Floating Rate Notes, maturing 17 April 2016, stock code HPF01: …………‘A(ZA)’.
– ZAR 300m, Senior Secured Floating Rate Notes, maturing 17 February 2017, stock code HPF04: .…..‘A(ZA)’.
– ZAR 200m, Senior Secured Fixed Rate Notes, maturing 17 February 2017, stock code HPF05: .…….‘A(ZA)’.
Concurrently, GCR has accorded a final, public rating of ‘A(ZA)’ and a ‘Stable’ Outlook to the following Senior Secured Notes (HPF04 Tap Issuance; the ‘Tap Issuance Notes’) that were issued by the Issuer on 23 April 2014, stock code HPF04 (the ‘Transaction’):
– ZAR 100m, Senior Secured Floating Rate Notes, maturing 17 April 2017, stock code HPF04: ………‘A(ZA)’.
GCR has accorded the above credit rating(s) to the above mention Senior Secured Notes based on the following key criteria:
The Existing Notes and the Tap Issuance Notes (collectively the Senior Secured 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, GCR has accorded a ‘BBB-(ZA)’ long term, national scale, corporate credit rating with a ‘Positive’ outlook to the Issuer. A rating uplift of 4 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 Secured Notes relate to the 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 Secured Notes may change, but potentially not in the same scale. GCR analysed the Transaction by applying its Global Structurally Enhanced Corporate Bonds Rating Criteria. For more information on the Transaction, please read GCR’s New-Issuance Report on this Transaction published on 30 April 2014.
NATIONAL SCALE RATINGS HISTORY
Initial rating (April/2013)
Senior Notes rating: A(ZA)
Last rating (February/2014)
Senior Notes rating: A(ZA)
+27 11 784 1771
Head of Structured Finance Ratings
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structurally Enhanced Corporate Bonds Rating Criteria – (Oct’2013)
Criteria for Rating Property Funds
HPF Corporate Rating Report (Nov’13)
HPF R650m New-Issuance Report (Feb’14)
RATING LIMITATIONS AND DISCLAIMERS
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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 2013; an overview of the Issuer’s Hotels portfolio for the period ending 28 February 2014; a performance forecast for the period beginning December 2012 and ending December 2018; 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.