TD Waterhouse Web Site - October 26, 2007
Standard & Poor's Ratings Services today assigned its preliminary 'AAA' senior secured debt rating to Royal Office Finance LP's C$1.23 billion senior secured amortizing bonds due October 2032.
The preliminary 'AAA' rating assigned to the issue of senior secured bonds by Royal Office Finance LP (ROFLP) reflects the creditworthiness of Public Works and Government Services Canada (PWGSC) and the federal government; the certainty of a rent stream fixed for 25 years; triple net leases with limited setoff and termination rights; bankruptcy-remote sole-purpose special purpose entities ( SPEs) established for the transaction; and a minimum 1x debt service cover through the 25-year term. These strengths are somewhat counterbalanced by the risk associated with refinancing C$425 million at term-end; and a minor amount of appropriation risk.
The bonds are secured by an absolute assignment of rent payments from PWGSC, a ministry of the federal government. Canadian Leaseback LP (CLLP) and ROFLP are formed by Larco Investments Ltd. PWGSC is the ministry of the federal government responsible for providing support to federal ministries and agencies by purchasing goods and services and providing office accommodation and technology services. Larco is a successful privately-owned real estate operator and developer based in British Columbia.
(Note: Private Placement Letter reports that the bonds were bought by 43 Canadian investors at 86 basis points over Canadian Government Treasurys, for a coupon of 5.209%.)
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