The use of listed debt by real estate companies in South Africa.
This research report aims to identify the factors which influence the decision forreal estate companies, to utilise listed debt as a source of finance.The researcher conducted a content analysis on the responses to 15 semistructuredinterviews representing the five largest banks in South Africa, tenproperty listed companies, and the Bond Exchange of South Africa. The themesfrom this empirical data were used to confirm or reject the nine propositions arisingfrom the literature review.The research revealed that firstly, through the use of securitisation, it is possible toreduce the cost of debt finance.Next, in terms of flexibility, a number of properties owned by a listed propertycompany would be transferred into a bankruptcy remote vehicle during thesecuritisation process. This is done to enhance the rating of the issue. In order toobtain a higher rating, strict covenants are put in place. This, however, does nothave to be a limiting factor, as some flexibility can be built into the initial structure.Finally, since the banking sector has reduced their lending rates considerably, anuncovered corporate bond may not be viable at this stage. It is more viable toreduce the cost of funding through the issue of securitised / covered bonds.
Year of publication: |
2011-03-28
|
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Authors: | Chathley, Ajay Singh |
Subject: | Real estate | Debt | listed |
Saved in:
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