DBRS Rates CT REIT’s $150 Million Series C Senior Unsecured Debentures and $200 million Series D Senior Unsecured Debentures at BBB (high), Stable

DBRS Limited (DBRS) has today assigned a rating of BBB (high) with a Stable trend to the $150 million 2.159% Series C Senior Unsecured Debentures, due June 1, 2021, and the $200 million 3.289% Series D Senior Unsecured Debentures, due June 1, 2026 (together, the Series C and D Bonds), issued by CT Real Estate Investment Trust (CT REIT or the Trust).

The Series C and D 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 Real Estate Investment Trust Limited Partnership (CT REIT LP), and in turn, for CT REIT LP’s use in paying down certain amounts outstanding under its credit facility, and that the balance of the proceeds will be retained for general business purposes.

DBRS notes that there is no form of guarantee provided by CT REIT LP to CT REIT’s Series C and D Bonds and any other existing or future debt obligations of the Trust. However, DBRS believes the Series C and D Bonds will rank pari passu with the Class C LP Units in terms of distributions and claims at CT REIT LP. This is due to the fact that (1) the Class C LP Units held by Canadian Tire Corporation rank pari passu with the Class D LP Units held by CT REIT and (2) the Class D LP Units are expected to have similar terms as those of the Series C and D Bonds (such as maturity date and interest rate). In addition, the subordination of the Senior C and D Bonds caused by prior ranking debt held at CT REIT LP (mortgages and a $300 million unsecured credit facility) is not material at the current levels. CT REIT LP also 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 on its unsecured credit facility.

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

The applicable methodology is Rating Companies in the Merchandising Industry (August 2015), which can be found on our website under Methodologies.