DBRS Morningstar Comments on the Progress of First Capital Realty Inc.’s REIT Conversion Transaction

DBRS Limited (DBRS Morningstar) notes the progress of First Capital Realty Inc.’s (rated BBB, Under Review with Developing Implications by DBRS Morningstar) previously announced conversion to a real estate investment trust (REIT; the REIT Conversion Transaction) following distribution of the Management Information Circular (MIC) dated October 25, 2019, and notice of a special meeting of shareholders to be held on December 10, 2019. The update below is a follow up to DBRS Morningstar’s press release dated April 16, 2019.

DBRS Morningstar is of the view that the REIT Conversion Transaction is progressing according to its expectations and that details disclosed in the MIC are consistent with management’s prior indications that the REIT Conversion Transaction would not affect the existing Senior Unsecured Debentures with respect to ranking and seniority in the structure. Importantly, the newly formed First Capital REIT will be co-principal debtor under the Indenture and the Senior Unsecured Debentures shall be guaranteed by all applicable guarantor entities required by the terms of the Indenture. DBRS Morningstar expects that any future issuances of Senior Unsecured Debentures will rank pari passu with the existing Senior Unsecured Debentures.

DBRS Morningstar expects to resolve the Under Review with Developing Implications status with the conclusion of the shareholder vote on December 10, 2019, assuming satisfactory review of legal documentation, notwithstanding that the actual closing of the REIT Conversion Transaction is anticipated by December 30, 2019. DBRS Morningstar remains of the view that a negative rating action is not anticipated as a result of the REIT Conversion Transaction.

Notes:
The principal methodologies are Rating Entities in the Real Estate Industry, DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries, DBRS Criteria: Guarantees and Other Forms of Support and DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers, which can be found on dbrs.com under Methodologies & Criteria.

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