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Restructuring helps Dipula improve credit rating

After the collapse of its dual capital structure into a single class of ordinary shares in April, Dipula Income Fund’s credit rating has been upgraded with a stable outlook due to its solid operational performance and stable operating profits throughout the Covid-19 pandemic.

Global Credit Ratings (GCR) upgraded assigned Dipula’s SA long- and short-term  ratings were debt to BBB+ and A2, respectively, citing certainty that the company will be able to repay its debts after a solid performance.  The agency said there could be further ratings positive ratings improvements if Dipula diversifies its funding sources and lengthens its debt maturity.

“The stable outlook reflects our view that Dipula should continue to display earnings resilience and that credit protection metrics will be consistent with expectations for the rating level,” said GCR said in a statement.

Dipula is a JSE-listed real estate investment trust (Reit) that owns a diversified portfolio of retail, office, industrial and residential rental assets located across all provinces of SA.

Its loan-to-value (LTV) has remained at between 37%-40% during the review period with a diverse portfolio that supports a lower risk profile. GCR expects the company’s operating profit to gradually increase, despite inflationary pressures, with the operating margin remaining between 62% to 65% from 63.5% during the first half of 2022. the full year 2022.

CEO, Izak Petersen said they were company was pleased with the ratings upgrade, adding that their its hands-on approach and the defensive nature of Dipula’s retail portfolio is the reason for the company’s solid performance over the years

“The simplification of our capital structure has paved the way to eliminate misalignment of interests between shareholders, enabling Dipula to pursue growth opportunities subject to sensible cost of capital relative to the return on investment,” said Petersen.