DBRS Comments on West Edmonton Mall Property Inc.’s Proposed Guarantee and Permitted Subordinate Encumbrance Financing

DBRS Limited (DBRS) has today commented on West Edmonton Mall Property Inc.’s (the Issuer) announcement that it is providing a limited guarantee of up to $425 million (the Limited Guarantee), which is secured by a subordinated debenture in the form of a Permitted Subordinate Encumbrance against West Edmonton Mall (the Property) under and pursuant to the terms of Section 11.12(a) of the Restated Trust Indenture dated February 13, 2014 (the Trust Indenture).

DBRS has determined that the proposed Permitted Subordinate Encumbrance and related Limited Guarantee meet the terms of the Trust Indenture, including the Rating Agency Condition defined therein, such that it will not, in and of itself, result in a downgrade, withdrawal or qualification of DBRS’s rating of the Issuer’s Series B Bonds, which consist of $350 million 4.309% First Mortgage 10-Year Interest Only Series B1 Bonds and $550 million 4.056% First Mortgage 10-Year Amortizing Series B2 Bonds.

The Permitted Subordinate Encumbrance is in relation to a USD 350 million construction bridge facility (the Bridge Facility) to be borrowed by Ameream LLC, an affiliate entity of the Issuer. The Bridge Facility is for the ongoing construction and development of the American Dream project, a retail and entertainment complex located in East Rutherford, New Jersey. The Bridge Facility is expected to mature in the next several months, upon which the Issuer intends to replace it with a new USD 1.6 billion senior construction facility. At such time, DBRS will conduct a further review of the documents associated with the new senior construction facility to determine if the terms of the Rating Agency Condition have been met to DBRS’s satisfaction.

DBRS notes that the Permitted Subordinate Encumbrance is fully subordinated under the terms of a Subordination and Standstill Agreement, and as such, a default under the Bridge Facility does not permit the lenders under the Bridge Facility to accelerate and enforce against the Issuer or the Property until and unless the Series B Bonds have been paid in full.

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

The principal methodology is Rating Entities in the Real Estate Industry (June 2016), which can be found on dbrs.com under Methodologies.