Research Update: Teranet Holdings L.P. Ratings Lowered To 'BBB-' From 'BBB' On Weak Volumes, Uncertain Recovery Pace; Outlook Stable

While we continue to rate Canadian real estate services provider Teranet Holdings L.P. investment-grade, the strong decline in transaction volumes since 2022, high leverage, and uncertain pace of real estate market recovery in Canada led us to lower our ratings on the company. While the market expects a gradual decline in interest rates for 2024 and 2025, the pace of recovery to previous transaction volumes is still uncertain, in our view. We expect Teranet's leverage to remain above 10x and funds from operations (FFO) to interest coverage to drop to 1.65x-1.7x in 2023 from above 2x in previous years, and still below 1.8x in 2024. Therefore, we lowed our issuer credit rating and rating on its senior secured debt to

...- While we continue to rate Canadian real estate services provider Teranet Holdings L.P. investment-grade, the strong decline in transaction volumes since 2022, high leverage, and uncertain pace of real estate market recovery in Canada led us to lower our ratings on the company. - While the market expects a gradual decline in interest rates for 2024 and 2025, the pace of recovery to previous transaction volumes is still uncertain, in our view. - We expect Teranet's leverage to remain above 10x and funds from operations (FFO) to interest coverage to drop to 1.65x-1.7x in 2023 from above 2x in previous years, and still below 1.8x in 2024. - Therefore, we lowed our issuer credit rating and rating on its senior secured debt to '###-' from '###'. The outlook is stable. - We also revised our upgrade trigger of FFO to interest coverage ratio to above 2x from 1.75x for Teranet given the downgrade reflects our view that the business volatility has been higher than expected. - The stable outlook...

Research Update