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 4.71% $110 million, Series 2015-2 and the 5.11% $165 million, Series 2015-3 Senior Secured Bonds (the Senior Bonds) issue of Teranet Holdings LP (the Company). The Series 2015-2 Bonds mature on December 10, 2035, and the Series 2015-3 Bonds mature on December 10, 2045.

The intended use of the proceeds from the Senior Bond issues will be to refinance the $475 million Senior Bond Series 2010-1, which matures 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.

The positive trend in Ontario registration volumes that began in the prior year has continued through 2015. Year-to-date (YTD) Q3 2015 normalized registrations grew by 9.9% compared with the same period in 2014. Furthermore, the positive trend in normalized registrations continued in October, growing 15.9% from prior year. The continued growth was mainly reflective of a robust Ontario housing market and low mortgage rate environment. Ontario revenues also continue to trend positively, with revenue growth of 10.1% for YTD Q3 2015. Operating expenses increased by 5.9% for YTD Q3 2015 to support the Teraview re-platforming and other strategic initiatives. The solid revenue growth led to a YTD Q3 2015 increase in EBITDA of 13.6% compared with the same period last year. This further strengthened the debt service coverage ratio, as calculated by DBRS, to 1.77 times (x) for Q3 2015 on a rolling 12-month basis compared with 1.66x for the same period in 2014. DBRS expects solid registration volumes to continue 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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.