The Senior Notes are fully amortizing with a 25-year legal maturity, issued by
The indirect owner of the data centres is
With this transaction structure, the Issuer does not have direct ownership of the data centres and is not a direct counterparty on the tenant leases, but has 100% equity ownership in the AssetCos that do own the data centres and have interests in the tenant leases as lessors. The AssetCos as guarantors of the Notes have pledged and assigned their lease interests in the tenant leases as security, including all rights to rents and revenues generated therein and grant first priority mortgages over their respective fee-simple interests in the data centres. DBRS Morningstar has received and reviewed true sale and substantive nonconsolidation legal opinions in support of the transaction structure.
The data centre portfolio consists of seven data centres located in primary data centre markets in
The BBB rating is underpinned by: (1) highly stable cash flow deriving from lease payments to the data centres; (2) the resiliency and 'sticky' nature of the revenue stream owing to the critical and strategic nature of the data centre assets to the tenants' business operations; (3) strong and favourable debt package to noteholders and (4) material upside revenue potential from unleased portions of the largest site in the portfolio. DBRS Morningstar notes the debt and security package offers protections to noteholders typical of that expected of a well-structured project finance transaction. The primary constraints on the rating include (1) re-leasing risk of each lease at various intervals, subjecting the Issuer to the risk of either tenants opting out of their leases or obliging the Issuer to grant concessions as an inducement for tenants to remain; (2) risks related to technical obsolescence or deterioration of competitive position; and (3) lower or nonrated tenants.
Debt servicing of the Notes relies on lease payments received by each
The proposed debt scenarios feature DSCR profiles, as calculated based on DBRS Morningstar's rating case assumptions and revenue haircuts, with a minimum and average DSCR of 2.28x/2.56x (effectively an interest coverage ratio (ICR)), and a refinance DSCR at the five year mark of 1.18x (min) / 1.29x (average) based on DBRS Morningstar's rating case, which incorporates the constraints and challenges of the project. The minimum/average DSCRs in the first five years, combined with the refinance metrics, are consistent with a BBB(low) rating. DBRS Morningstar has applied a one-notch uplift to account for the soft refinance nature of the debt, in which a failure to refinance does not lead to a default but rather to a cash sweep where all cash after expenses and interest payments are swept to principal; DBRS Morningstar notes in the exceedingly unlikely event that the Sponsors do not refinance the debt for the full duration to legal maturity, cash flows of up to 20% lower than the rating case assumptions are still sufficient to fully amortize debt.
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in
The principal methodologies are Rating Project Finance (
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The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
21-Jul-21 Issuer Rating Provis.-Final BBB Stb CA
21-Jul-21 A-1 Variable Funding Note Provis.-Final BBB Stb CA
21-Jul-21 A-2 Term Note Provis.-Final BBB Stb CA
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