DBRS Assigns Rating of BBB (high), Stable, to CT REIT’s $200 Million Series F Senior Unsecured Debentures

DBRS Limited (DBRS) assigned a rating of BBB (high) with a Stable trend to the $200 million 3.865% Series F Senior Unsecured Debentures due December 7, 2027 (the Series F Debentures), issued by CT Real Estate Investment Trust (CT REIT or the Trust).

The Series F Debentures 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 notes that there is no form of guarantee provided by CT Real Estate Investment Trust Limited Partnership (CT REIT LP; rated BBB (high) with a Stable trend by DBRS) to CT REIT’s Series F Debentures or any other existing debt obligations of the Trust. DBRS, however, believes the Series F Debentures will rank pari passu with the Class C LP Units of CT REIT LP held by Canadian Tire Corporation, Limited (the Class C LP Units) in terms of distributions and claims. This is because of 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 F Debentures (including the maturity date and interest rate). In addition, the subordination of the Series F Debentures caused by prior-ranking debt held at CT REIT LP (i.e., 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 any uncommitted accordion provision, if applicable) exceeds 40% of total debt.

DBRS understands that the net proceeds from the offering will be used by CT REIT to buy the Class D LP Units of CT REIT LP, and in turn, CT REIT LP will pay down certain amounts outstanding under its Bridge Facility and Credit Facility and will retain the balance of the proceeds for general business purposes.

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 (January 2018), which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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