DBRS Assigns BBB (high) Rating to CT REIT’s $150 Million Series A Senior Unsecured Debentures and $200 Million Series B Senior Unsecured Debentures, Stable Trends

DBRS Limited (DBRS) has today assigned a rating of BBB (high) with a Stable trend to $150 million 2.852% Series A Senior Unsecured Debentures, due June 9, 2022, and $200 million 3.527% Series B Senior Unsecured Debentures, due June 9, 2025 (collectively, the Senior Unsecured Debentures or the Series A and B Bonds), issued by CT Real Estate Investment Trust (CT REIT).

DBRS notes that there is no form of guarantee provided by CT Real Estate Investment Trust Limited Partnership (CT REIT LP) to CT REIT’s Series A and B Bonds and any other existing or future debt obligations of the Trust. DBRS, however, believes the Series A and B Bonds will rank pari passu with the Class C and D LP Units in terms of distributions and claims at CT REIT LP. This is due to the fact that the Class D LP Units are expected to have similar terms as those of the Series A and B Bonds, such as maturity date and interest rate. As such, the subordination of Senior A and B Bonds caused by prior ranking debt held at CT REIT LP (mortgages and a $200 million unsecured credit facility with a $100 million uncommitted accordion) is not material at the current levels. In addition, CT REIT LP has a covenant in place restricting the level of secured debt to less than or equal to 20% of aggregate assets.

The ratings incorporate the aforementioned covenant and DBRS’s expectation that no unsecured debt would be issued at CT REIT LP (excluding amounts drawn on its existing credit facility) going forward. DBRS expects any future unsecured debentures to be issued at CT REIT. DBRS also does not expect CT REIT LP to increase the limit past $300 million on its unsecured credit facility.

The Series A and B Bonds are direct senior unsecured obligations of CT REIT and rank equally and rateably with one another and with all other unsecured and unsubordinated Indebtedness of CT REIT. DBRS understands that the net proceeds from the offerings will be used to buy Class D LP Units of CT REIT LP and in turn CT REIT LP to repay in full certain indebtedness owing to Canadian Tire Corporation (CTC) that was incurred on June 1, 2015, in connection with the redemption by the Partnership of the Series 1 Class C LP Units held by CTC, to pay down certain amounts outstanding under CT REIT’s credit facility, and to retain the balance of the proceeds for general business purposes.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Entities in the Real Estate Industry (May 2015) and Rating Companies in the Merchandising Industry (January 2015), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.