U.K. supermarket retailer Tesco is planning a ₤680.0 million ($1.09 billion) securitization of rental income derived from 21 retail stores located in the U.K.
The deal, Tesco Property Finance 4 Plc Class A notes due October 2040, is backed by properties that are fully let to Tesco Stores and Tesco Property Nominees No.1 and No.2, which are the tenants, until December 2040.
The issue is expected to be rated 'A3' by Moody’s Investor Service, 'A-' by Standard and Poor's and 'A-'by Fitch Ratings.
According to Fitch, Tesco is the ultimate guarantor of all rental payments. This is why the expected rating is fully credit-linked to the rating of Tesco and any change in the corporate rating is likely to result in a corresponding change in the rating of the notes.
The transaction has an expected initial LTV ratio of 106.3% and an expected initial loan-to-vacant possession value ratio of 138.3%, although the scheduled amortization will ensure that these ratios decline to zero by loan maturity.