JOHANNESBURG – Property Developer Hyprop has moved to prove its capacity for self-funding by raising R4 billion in the last quarter in defiance of a Moody’s rating agency decision to downgrade its credit last year.
Hyprop said yesterday that it successfully raised the money through various instruments.
These include unsecured five-year notes which would finance capital expenditure to improve the entertainment offerings at its malls and new tenant fit-outs necessitated by the reduction of space occupied by the Edcon group.
It said the interest on the finance debt would be determined on the draw-down date of the new loans before the end of next month.
Hyprop said the rate was expected to be in line with the average cost of borrowing in Euros of the maturing loans.
“As noted in Hyprop’s interim results for the period ended December 31, 2018, the group has historically been able to refinance its debt with no difficulties, and as reflected in this announcement, it is confident of its ability to continue to do so,” it said.
Moody's downgraded Hyprop after it flagged that the developer would rely on external financing to cover R5bn of debt coming due in the next 18 months.
The group said work on refinancing the US dollar-denominated debt in its sub-Saharan Africa portfolio and the ZAR-denominated bonds due for redemption in August and November 2019, as well as other concerns raised by Moody’s, was continuing.
The fund said the main reason cited by Moody’s for the downgrade was its estimates that the debt-to-asset ratio, adjusted for the full consolidation of Hystead, had increased to 41 percent at end-June last year from 33.4 percent in the previous year, because of debt-funded acquisitions in Eastern Europe.
UK-based Hystead is the company that houses Hyprop’s European investments. Moody’s calculated this ratio at 38.6 percent when adjusted only for the Hystead gross debt guaranteed by Hyprop.
But yesterday Hyprop said Moody’s estimate of the debt-to-asset ratio of 41 percent assumed that Hystead was fully consolidated into its portfolio.
The group said it also signed the agreements for the refinancing of €50 million (R3.1bn) of debt for three years to March 2022, €53m for five years to 2024 and €110m with an original maturity date of March 2020 for five years to 2024.
“Hyprop and Hystead have successfully refinanced their maturing debt with external bank finance in the past, and are confident of their ability to continue to do so,” the group said.
Shares in Hyprop gained 1.07 percent on the JSE on Tuesday to close at R71.76.