DBRS Assigns BBB (high) Rating to CT REIT’s $175 Million Series E Senior Unsecured Debentures, Stable Trend

DBRS Limited (DBRS) has today assigned a rating of BBB (high) with a Stable trend to the $175 million 3.469% Series E Senior Unsecured Debentures, due June 16, 2027 (Series E Bonds), issued by CT Real Estate Investment Trust (CT REIT or the Trust).

The Series E 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 CT REIT will use the net proceeds from the offering to buy the Class D LP Units of CT Real Estate Investment Trust Limited Partnership (CT REIT LP), and in turn CT REIT LP will pay down certain amounts outstanding under its credit facility, and to retain the balance of the proceeds for general business purposes.

DBRS notes that there is no form of guarantee provided by CT REIT LP to CT REIT’s Series E Bonds and any other existing debt obligations of the Trust. DBRS, however, believes the Series E Bonds will rank pari passu with the Class C LP Units of CT REIT LP held by Canadian Tire Corporation (Class C LP Units) in terms of distributions and claims. This is due to the fact that (1) the Class C LP Units rank pari passu with the Class D LP Units and (2) the Class D LP Units are expected to have the same terms as those of the Series E Bonds (such as maturity date and interest rate). In addition, the subordination of the Series E 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 level.

The rating incorporates 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 such that the combination of secured debt and the limit on the unsecured credit facility (including the uncommitted accordion provision) exceeds 40% of total debt.

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

The principal methodologies are Rating Entities in the Real Estate Industry (April 2017) and DBRS Criteria: Guarantees and Other Forms of Support (February 2017), which can be found on dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.