Change in credit rating by Moody’s
HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
JSE share code: HYP ISIN: ZAE000190724
JSE bond issuer code: HYPI
(Approved as a REIT by the JSE)
("Hyprop" or "the Group" or "the Issuer")
CHANGE IN CREDIT RATING BY MOODY'S
Shareholders and holders of the Issuer's debt securities issued under its Domestic Medium Term Note Programme are
advised that Moody's Investor Services Inc (Moody's) has lowered the Issuer's rating from Baa3 to Ba1 with immediate
effect. Concurrently, Moody's has lowered the long-term national scale issuer rating to Aa3.za from Aa1.za and has
affirmed the short-term national scale rating of Prime-1.za.
The main reason cited for the decrease in the rating is that Moody's estimates that the debt-to-asset ratio, adjusted for
the full consolidation of Hystead Limited ("Hystead"), increased to 41% at 30 June 2018 from 33.4% in 2017, as a result
of debt funded acquisitions in Eastern Europe. Moody's calculate this ratio as 38.6% when adjusted only for the Hystead
gross debt guaranteed by Hyprop. Moody's further states that Hyprop will rely on external financing to cover
ZAR5 billion of debt coming due in the next 18 months, including the debt that it guarantees in favour of Hystead.
Hyprop's strategy in funding the expansion into Eastern Europe has been to raise the required funding via debt, utilising
Hyprop's South African balance sheet. This was done, inter alia, to match currencies between debt, assets and operating
cashflow and thereby mitigate the Group's exposure to fluctuations in exchange rates, and to reduce borrowing costs.
Hyprop's debt-to-asset ratio, as calculated by Hyprop taking into account its attributable share of the net assets of
Hystead, the full Hystead debt guaranteed by Hyprop, and the back-to-back security Hyprop holds from PDI Investment
Holdings Limited ("PDI") in relation to the guarantees, was 32.6% at 30 June 2018.
Moody's estimate of the debt-to-asset ratio of 41% assumes that Hystead is fully consolidated into Hyprop, which,
having regard to the terms of the Hystead shareholder arrangements, is not permitted under International Financial
Reporting Standards. Further, in making this estimate Moody's disregards the "in country debt" in Hystead for which
there is no recourse to Hyprop, and the portion of the Hystead debt guaranteed by PDI.
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. Hyprop management has engaged with banks on refinancing ZAR3 billion
of the debt due in the next 18 months.
Hyprop maintains that the manner in which it has funded Hystead remains appropriate in the context of managing
exchange rate risks, reducing borrowing costs and utilising Hyprop's strong South African balance sheet to secure
offshore funding. Hyprop has taken cognisance of Moody's comments.
Moody's full report is available online at www.moodys.com.
13 February 2019
The Standard Bank of South Africa Limited
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