Fitch Affirms Redefine's Ratings; Off RWP; Outlook Positive
Fitch Ratings-London/Johannesburg-07 September 2009: Fitch Ratings has today affirmed Redefine Income Fund Ltd's (Redefine) National Long-term unsecured debt rating of 'BBB(zaf)' and removed the rating from Rating Watch Positive (RWP). The rating Outlook is Positive. Fitch has simultaneously affirmed Redefine's National Long-term secured debt rating of 'A-(zaf)' and subordinated debentures rating of 'BB(zaf)'. The agency has assigned Redefine a Short-term rating of 'F3(zaf)'.
The rating affirmation follows the approval from the South African Competition Authorities for the merger of Redefine Income Fund, ApexHi Properties and Madison Property Fund Managers. Fitch had previously placed Redefine's ratings on Rating Watch Positive (RWP) following the announcement of the potential merger transaction in April 2009. The agency believes the newly-merged Redefine has the potential to enhance its operational profile through the increased scale of its direct property portfolio and the diversified sector spread provided by the property assets. Fitch expects potential merger synergies to be reflected in the next 12-18 months, following the successful integration of the three entities.
On completion, the transaction will make Redefine one of the largest listed property loan stock companies in South Africa with a direct commercial property portfolio worth an estimated ZAR18.2bn in FY09 (FY08:ZAR5.9bn) based on management guidance. Fitch recognises that Redefine has maintained a relatively strong tenant profile, as demonstrated by its historical low vacancy rates, which is reflected in its ratings. However, the agency further notes that a significant number of leases expire within 24-months which could negatively affect lease renewals in this period.
The Positive Outlook reflects Fitch's expectation that Redefine's credit metrics will broadly improve following the acquisition. The agency notes this will be supported by Redefine's moderate debt levels and as loan-to-value gearing is expected to improve below Redefine's pre-transaction levels. Nonetheless, Redefine's ratings are currently constrained by the depressed trading conditions in the retail and business property sectors. Fitch believes this could potentially impact on operational performance in the short-term, although such an impact would likely be marginal.
Redefine is a property loan stock company which has investments in a portfolio of retail, office and industrial properties. Most of the properties are situated in and around the main commercial hubs of greater Johannesburg, the Western Cape and Durban. The company also holds a portfolio of listed property securities of ZAR2.7bn as of 31 August 2008.
Contacts: Karabo Matentji, Johannesburg, Tel: +27 11 380-0910; Roelof Steenekamp, +27 11 380-0903.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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