Johannesburg, 07 February 2014: Global Credit Rating Co. (Pty) Ltd (‘GCR’) has accorded an indicative, public long term ‘A(ZA)’ ratings and ‘Stable’ Outlooks to the following Senior Secured Notes (the ‘Senior Notes’) to be issued by Hospitality Property Fund Limited (the ‘Issuer’) on 17 February 2014 (the ‘Transaction’):
– ZAR 300m1, Senior Secured Floating Rate Notes, expected maturity February 2017, stock code HPF04: .……………‘A(ZA)’.
– ZAR 200m1, Senior Secured Fixed Rate Notes, expected maturity February 2017, stock code HPF05: .……………‘A(ZA)’.
Concurrently, GCR has affirmed the final, public long term ‘A(ZA)’ rating and ‘Stable’ Outlook accorded to the Issuer’s Senior Notes issued in April 2013:
– ZAR 150m, Senior Secured Floating Rate Notes, maturing 17 April 2016, stock code HPF01: .……………‘A(ZA)’.
1 Targeted issuance amount.
Global Credit Ratings has accorded the above credit rating(s) to Hospitality Property Fund’s Senior Secured Notes based on the following key criteria:
The R650m collectively in Senior Secured Notes will be secured by a portfolio of the Issuer’s hotels (the underlying collateral). The Transaction entails the public listing of the Senior Secured 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 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 rating excludes 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 may also change, but potentially not in the same scale. The indicative, public ratings will only be finalised upon receipt of satisfactory final, executed signed transaction documentation. GCR analysed the Transaction by applying its Global Structurally Enhanced Corporate Bonds Rating Criteria. For more information on the Transaction, please read GCR’s Pre-funding Report on this Transaction to be published on 7 February 2014.
NATIONAL SCALE RATINGS HISTORY
Initial rating (April/2013)
Secured Bond rating: A(ZA)
Last rating (April/2013)
Secured Bond rating: A(ZA)
Mark Vrdoljak/ Tinashe Nyautore
+27 11 784 1771
Head of Structured Finance
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structurally Enhanced Corporate Bonds Rating Criteria – (October’2013)
Criteria for Rating Property Funds
HPF Property Fund R150m Secured Notes New Issuance Report (April’13)
HPF Corporate Rating Report (November’13)
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 credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating.
The information received from the Arranger, the Issuer 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 as at 30 December 2013; 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 transaction documents together with the relevant legal and tax opinions.
The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.