DBRS Rates Teranet Holdings LP’s Debt Issue at BBB with a Stable Trend

DBRS Limited (DBRS) has today assigned a rating of BBB with a Stable trend to the $200 million, Series 2015-1, 3.646% Senior Secured Bond (the Senior Bonds) issue of Teranet Holdings LP (the Company). The Senior Bonds have been issued from the November 3, 2015, Offering Memorandum and will mature on November 18, 2022.

The intended use of the proceeds from the Senior Bond issue will be to refinance a portion of the $475 million Senior Bonds, Series 2010-1, which mature on December 16, 2015. The financing is consistent with DBRS’s expectations incorporated in the May 25, 2015, confirmation of the Company’s rating. The Senior Bonds rank pari passu with all other senior secured and unsubordinated obligations of the Company. As a result, the rating is consistent with the ratings previously assigned by DBRS to the Company’s similarly ranked senior secured bonds outstanding. DBRS notes that the Company has planned an additional bond issuance of $275 million to be executed in the U.S. market in early December.

The positive trend in Ontario registration volumes that began in Q4 2014 has continued through 2015. During H1 2015, normalized registrations grew by 11.4% compared with the same period in 2014. Normalized registrations continue to trend well, with July and August growing 8.2% and 6.3%, respectively, from the prior year. The continued growth is mainly reflective of a robust Ontario housing market and low mortgage rate environment. Ontario revenues also continue to trend positively with revenue growth of 11.0% growth for H1 2015 year over year. Ontario operating expenses increased slightly by 1.9% in H1 2015 to support technology modernization and strategic initiatives. The good revenue growth drove H1 2015 EBITDA growth of 16.2% compared with the same period last year. This contributed to a strengthening in the debt service coverage ratio, as calculated by DBRS, to 1.75 times (x) for H1 2015 on a rolling 12-month basis compared with 1.62x for the same period last year. DBRS expects solid registration volumes to continue in Q3 2015 through to the end of the year, although economic headwinds could dampen the Company’s performance in 2016.

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

The applicable methodology is Rating Public-Private Partnerships, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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