Research Update: Teranet Holdings L.P. Outlook Revised To Negative From Stable On Weaker Real Estate Activity; ?BBB? Ratings Affirmed

We expect Teranet Holdings L.P.'s funds from operations (FFO) to interest coverage to drop below 1.75x in 2023 driven by a slowdown in real estate transactions in the context of interest rate hikes and lower housing affordability in a market that needs to adjust to a new economic climate. Teranet generates about 45%-47% of its revenues from registration and search activities directly tied to housing market sales in Ontario, which we expect to decline driven by decelerating economic activity and cumulative rate increases from the Bank of Canada (BoC) over the next 12 months. Therefore, we revised the outlook to negative from stable and affirmed our 'BBB' issuer and senior secured debt ratings on Teranet. The negative outlook reflects the

...- We expect Teranet Holdings L.P.'s funds from operations (FFO) to interest coverage to drop below 1.75x in 2023 driven by a slowdown in real estate transactions in the context of interest rate hikes and lower housing affordability in a market that needs to adjust to a new economic climate. - Teranet generates about 45%-47% of its revenues from registration and search activities directly tied to housing market sales in Ontario, which we expect to decline driven by decelerating economic activity and cumulative rate increases from the Bank of Canada (BoC) over the next 12 months. - Therefore, we revised the outlook to negative from stable and affirmed our '###' issuer and senior secured debt ratings on Teranet. - The negative outlook reflects the possibility of a downgrade over the next 12 to 24 months, if the registration volumes decline significantly below our base case assumption leading to FFO to interest coverage expectation below 1.75x beyond 2023....

Research Update