Rating Action Commentary
ֳ Affirms Henderson Park Real Estate Fund II SCSp's Subscription Facility at 'A'; Outlook Stable
Tue 17 Dec, 2024 - 12:34 PM ET
ֳ - London - 17 Dec 2024: ֳ has affirmed Henderson Park Real Estate Fund II SCSp's subscription facility at 'A' with Stable Outlook. The facility is secured by the uncalled capital commitments of the fund's limited partners (LPs).
The fund is advised by Henderson Park Capital Partners UK LLP. ֳ's rating only addresses the credit risk of the subscription facility, and should not be viewed as an indicator of the fund's past or future performance, or suitability as an investment for LPs.
KEY RATING DRIVERS
Limited Partner Pool Quality
The fund consists of 66 investors based mainly in North America and the Middle East. ֳ applied its Tier classification framework to derive rating assumptions for unrated investors, which represent 78% of the LP pool. Additionally, ֳ notched down the ratings of six LPs who have either committed capital through investment vehicles or had side letters with the fund that included provisions deemed negative by ֳ.
Quantitative Rating Indication
The baseline Quantitative Rating Indication (QRI) for the current LP pool is 'AAA', driven by the quality of the LP pool, an implied 58% maximum effective advance rate and a modelled 12-month exposure period. The 12-month exposure period reflects ֳ's minimum time horizon assumption for a QRI, and exceeds the facility's legal final maturity of August 2025.
ֳ has upgraded the final QRI to 'AAA' from 'AA-'. The upgrade reflects the LP pool's increased rating resilience to certain QRI assumptions, due primarily to changes in ֳ's assessment of the pool's credit quality.
Qualitative Assessment
The Qualitative Assessment (QA) score is '4', driven by the manager's fairly short operating history, limited number of funds managed, and moderate key person risk. The QA score is constrained by the fund's sector focus and by its still uncertain performance. It is supported by the fund's strong limited partnership agreement terms and level of funded commitments. The QA score of '4' results in a one-notch deduction from the final QRI, to 'AA+'.
Rating Caps and Limits
The facility rating is capped at 'A', driven by ֳ's scoring of the QA factor 'Resources & Scale' at '3', due to the fund manager's fairly short operating history, limited number of funds managed, and moderate key person risk. Although not currently applicable, the facility rating is also capped at 'AA+' as more than 20% of the LP base exposure is to unrated investors.
INVESTMENT MANAGER
Founded in 2016, Henderson Park is a European private equity real estate manager that targets investments in major European markets, managing approximately USD14 billion in investments.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
-Deterioration in the diversification or credit profile of LP pool of the fund could lead to a change in the QRI and a downgrade of the overall facility rating
-An amendment to the facility's terms leading to a material increase in the effective maximum advance rate could lead to a change in the QRI and a downgrade of the overall facility rating
-A material deterioration in the manager's operational or management capabilities
-Sustained deterioration in fund performance or underlying investments' value could lead to a lower QA
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
-Material reduction of the key person risk, along with a longer operating history of the manager, more funds and/or strategies being managed may lead to the removal of the 'A' rating cap
-The QA score could be revised higher once the fund deploys further capital to buy assets that will improve diversification, and demonstrates sufficiently positive performance over time
-Improvement in the credit profile and/or diversification of the LP pool that results in a sustained favourable change in the baseline and/or final QRIs
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
- Portfolio Credit Model, v2.16.2 (21 Jul 2023, 08 Jun 2023)
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| Henderson Park Real Estate Fund II SCSp | UK Issued, EU Endorsed |