U.K. supermarket retailer Tesco PLC is in the market with its GBP450 million ($703 million) credit tenant lease securitization called Tesco Property Finance 5 Plc.
The deal is jointly arranged by Goldman Sachs, HSBC Bank, Lloyds Bank and Royal Bank of Scotland.
The structure is backed by the long leasehold interest in a portfolio of 10 supermarkets and the commercial component of a mixed-use development located across the U.K. The existing properties and one planned supermarket are rented to Tesco related entities on 29-year and 328-day occupational leases with rental payments guaranteed by Tesco PLC.
Moody's Investors Service has assigned a preliminary rating of 'A3' to the single tranche offer and placed the rating under review for possible downgrade.
According to the rating agency, the provisional rating for the bonds addresses the expected loss posed to investors by the legal final maturity. However, its ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed but may have a significant effect on yield to investors.
"The long-term senior unsecured 'A3' rating of Tesco PLC was placed on review for possible downgrade on January 20, 2012," explained Moody's in a press statement. "Given the strong credit linkage of the bonds to Tesco PLC, the provisional rating of the bonds is placed on review for possible downgrade today."
Tesco Property Finance 5 Plc is the sixth sale and leaseback CMBS transaction brought to the capital markets involving Tesco.