Johannesburg, 10 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 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 an indicative, public rating of ‘A(ZA)’ and a ‘Stable’ Outlook to the following Senior Secured Notes (HPF04 Tap Issuance; the ‘Tap Issuance Notes’) that will to be issued on 25 April 2014, stock code HPF04 (the ‘Transaction’):
– ZAR 100m, Senior Secured Floating Rate Notes, maturing 17 April 2017, stock code HPF04: ………………….………………..……….…‘A(ZA)’.
RATING RATIONALE
GCR has accorded the above credit rating(s) to Hospitality Property Fund’s Senior Notes based on the following key criteria:
The Senior Notes and the Tap Issuance 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 Notes and the indicative, public rating accorded to the Tap Issuance 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. The indicative, public ratings accorded to the Tap Issuance Notes will be finalised upon receipt of signed executed 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 Prefunding Report on this Transaction to be published on 10 April 2014.
NATIONAL SCALE RATINGS HISTORY
Initial rating (April/2013)
Senior Notes rating: A(ZA)
Outlook: Stable
Last rating (February/2014)
Senior Notes rating: A(ZA)
Outlook: Stable
ANALYTICAL CONTACTS
Mark Vrdoljak
Analyst
+27 11 784 1771
markvrd@globalratings.net
Committee Chairperson
Emma-Jane Fulcher
Head of Structured Finance
+27 11 784 1771.
fulcher@globalratings.net
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)
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 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 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.
