Johannesburg, 25 February 2014 — Global Credit Rating Co. (“GCR”) has accorded a final, public short term ratings of ‘A1(ZA)’ with Rating Watch Negative to the following Senior Secured Notes to be issued by Adcorp Holdings Limited (“Adcorp”) on 25 February 2014:
• ZAR100m, Secured Commercial Paper, stock code ADCP05, coupon 3M JIBAR + 0.280%, due 26 May 2014.
• ZAR100m, Secured Commercial Paper, stock code ADCP06, coupon 3M JIBAR + 0.350%, due 25 August 2014.
Concurrently, GCR has affirmed the final, public long term ‘A(ZA)’ rating and placed on Rating Watch Negative the following Senior Secured Notes:
• ZAR400m, Secured Term Notes, stock code ADCB01, coupon 3M JIBAR + 2.490%, due 8 March 2018; and
• ZAR100m, Secured Term Notes, stock code ADCB02, coupon 3M JIBAR + 2.250%, due 31 July 2016.
The rating of the ZAR100m, Secured Commercial Paper, stock code ADCP05, is valid until 26 May 2014.
The rating of the ZAR100m, Secured Commercial Paper, stock code ADCP06, is valid until 25 August 2014.
The ratings of the ZAR400m, Secured Term Notes, stock code ADCB01 and ZAR100m, Secured Term Notes, stock code ADCB02, are valid until November 2014 unless an earlier rating is conducted on the Secured Commercial Paper or Secured Term Notes.
The rating of the Senior Notes is derived by applying a notching approach, starting from the long term unsecured corporate credit rating of Adcorp (‘BBB(ZA)’) with a rating uplift of three national scale notches deemed appropriate for the Senior Notes. The ratings of the Secured Term Notes and Secured Commercial Paper incorporate the recoveries from the ceded trade receivables. The ratings accorded to the Senior Notes relate to the ultimate (as opposed to timely, akin to a loss severity rating therefore) repayment of the principal and interest.
It should be noted that the Debtors Cover Ratio reached an all-time low of 1.57 as at 31 December 2013. The 31 January 2014 Debtors Cover Ratio was not yet available. The Compliance Certificate is only due 30 days after the last day of each month other than August and February. The August report is due within 60 days of the last day of August and within 90 days of the last day of February. Although the debtors book changes on a month to month basis, the margin of compliance with the Debtors Cover Ratio is at an all time low and near to the trigger level, especially due to the high concentration of debtors. As at the date of this report data from January 2014 was unavailable, for this reason GCR has placed the notes on Rating Watch Negative until further reporting has occurred. A breach of the Debtors Cover Ratio would result in an early amortisation of the notes.
+27 11 784 1771
Head of Structured Finance
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Summary Structurally Enhanced Corporate Bonds Rating Criteria (October 2013)
Global Master Criteria for Rating Corporate Entities (August 2013)
Adcorp Holdings Limited Senior Secured Term Notes (November 2013)
Adcorp Holdings Limited Rating Report (November 2013)
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: http://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: http://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT http://GLOBALRATINGS.NET.
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
The Issuer and the Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The rating/s above were solicited by the Arranger of the Transaction; GCR has been compensated for the provision of the ratings.
The credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating.
The information received from the Arranger / Issuer:
• Historical trade receivables data of the portfolio to be secured from January 2008 to December 2013.
• Debtors aging statistics for the abovementioned period.
• Provisions for bad debts and actual write-offs from provisions for the abovementioned period.
• Monthly collections for the abovementioned period,
• Audited financial statements of the Issuer for the year ended 28 February 2013 and year-to-date (December 2013) management accounts.
• Adcorp Holdings Credit Policy, credit application and terms & conditions.
• Compliance Certificate dated 31 December 2013.