Johannesburg, 21 June 2017 — Global Credit Ratings (“GCR”) has accorded final, public long-term credit ratings to the following senior unsecured floating rate notes (the “Notes”) issued by Commissioner Street No. 10 (RF) Ltd (the “Issuer”) under the Commissioner Street Collateralised Note Programme (the “Programme”):
- R500m Series 1 Notes, due 31 March 2018; ‘AA(ZA)(sf)’ with a Stable outlook.
- R750m Series 2 Notes, due 17 December 2020; ‘AA-(ZA)(sf)’ with a Stable outlook.
- R700m Series 3 Notes, due 12 August 2021; ‘AA(ZA)(sf)’ with a Stable outlook.
The ratings accorded to the Notes relate to timely payment of interest and ultimate payment of principal. The ratings exclude an assessment of the ability of the Issuer to pay any (early repayment) penalties.
The Notes were issued in three separate Series, whereby the assets and liabilities in relation to each Series are ring fenced such that the Noteholders in respect of any Series of Notes will have no recourse to the assets from any other Series of Notes. Each Series of Notes was issued in accordance with the terms and conditions stipulated in the respective Applicable Series Transaction Supplement.
The aggregate amount of Notes issued by the Issuer may not exceed the sum of the amounts stipulated in the Commissioner Street Master Programme Memorandum, as read in conjunction with the Applicable Issuer Supplement and the respective Applicable Series Transaction Supplements for the Series of Notes that were issued. The cumulative amount issued by the Issuer on the closing date (the “Transaction” and each “Series Transaction”) is R1.95bn, unless a higher limit is approved by the relevant transaction parties.
The underlying security (the “Finance Assets”) in relation to the Transaction is the rights, title and interest in loans provided by Absa Bank Ltd to the respective Series 1 Borrower (Land and Agricultural Development Bank of South Africa), Series 2 Borrower (Telkom SA SOC Ltd) and Series 3 Borrower (Industrial Development Corporation) (collectively referred to as the “Borrowers”). The Issuer utilised the proceeds from the issuance of the Notes to fund the purchase of the Finance Assets in respect of each Series, in accordance with the terms of the respective Sale Agreements.
The performance of the Notes is credit linked to the ability of each respective Borrower to make the payments due in respect of the Finance Assets. As such, in its analysis GCR looks through to the long-term unsecured ratings of the underlying Borrowers in respect of each Series. GCR relied on externally available public credit ratings in its analysis, in accordance with GCR’s credit-linked notes and repackaging vehicle rating criteria, in order to determine the rating of each Series of Notes.
In the event that the national long-term credit rating or the national senior unsecured credit rating of the Issuer be amended or withdrawn, or if the sovereign rating be amended or withdrawn, the rating of the Notes may follow suit. The rating of the Notes may also change if relevant risk presenting entities are not considered to be of sufficient credit quality anymore and no appropriate remedial action is undertaken when necessary. For more information please refer to the Commissioner Street No. 10 (RF) Ltd New Issuance Report to be published on 21 June 2017.
|Series 1 Notes|
|Series 2 Notes|
|Series 3 Notes|
Structured Finance Analyst
+27 11 784 1771
Senior Credit Analyst
+27 11 784 1771
Sector Head: Structured Finance Ratings
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’17;
Global Credit-Linked Note and Repackaging Vehicle Rating Criteria – May ’17;
Criteria for Rating Banks and Other Financial Institutions – Mar’17;
Criteria for Rating Corporate Entities – Feb ’17;
Commissioner Street No. 10 (RF) Ltd Pre-Funding Report – Mar ’17 and
With reference to publicly available credit ratings for the Land Bank, Telkom and the IDC.
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.
|Agreement||A negotiated and usually legally enforceable understanding between two or more legally competent parties.|
|Asset||An item with economic value that an entity owns or controls.|
|Borrower||The party indebted or the person making repayments for its borrowings.|
|Downgrade||The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.|
|International Scale Rating LC||International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Junior||A security that has a lower repayment priority than senior securities.|
|Loan||A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|Long-Term Rating||A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.|
|Noteholder||Investor of capital market securities.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Proceeds||Funds from issuance of debt securities or sale of assets.|
|Rating Outlook||A Rating outlook indicates the potential direction of a rated entity’s rating over the medium term, typically one to two years. An outlook may be defined as: ‘Stable’ (nothing to suggest that the rating will change), ‘Positive’ (the rating symbol may be raised), ‘Negative’ (the rating symbol may be lowered) or ‘Evolving’ (the rating symbol may be raised or lowered).|
|Recourse||A source of help in a difficult situation.|
|Repack||Rearrangement of securities with the intent to be more attractive for investment. Junior tranches (that have a higher degree of default risk) of a securitisation transactions that have been repackaged into separate debt securities (according to their degree of risk) that utilise credit-enhancement techniques to mitigate the risk. A CDO is created to distribute the prepayment risk amongst different classes of Notes.|
|Repayment||Payment made to honour obligations in regards to a credit agreement in the following credited order: 3.) Satisfy the due or unpaid interest charges; 4.) Satisfy the due or unpaid fees or charges; and 5.) To reduce the amount of the principal debt.|
|Security||An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.|
|Senior||A security that has a higher repayment priority than junior securities.|
|Short-Term Rating||A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.|
|Stock Code||A unique code allocated to a publicly listed security.|
|Structured Finance||A method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk.|
|Timely Payment||The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.|
|Transaction||A transaction that enables an Issuer to issue debt securities in the capital markets. A debt issuance programme that allows an Issuer the continued and flexible issuance of several types of securities in accordance with the programme terms and conditions.|
For a detailed glossary of terms utilised in this announcement please click here
SALIENT FEATURES OF INDICATIVE RATINGS ACCORDED
GCR affirms that a.) no part of the ratings was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
The Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The information received from the Arranger and other reliable third parties to accord the credit ratings included:
- Commissioner Street Master Programme Memorandum;
- Term loan facility agreements for the IDC, Telkom and Land Bank;
- Applicable Issuer Supplement;
- Applicable Series Transaction Supplement in respect of each Series Transaction;
- Applicable Pricing Supplement in respect of each Series of Notes;
- Administration Agreement in respect of each Series Transaction;
- Sale Agreement in respect of each Series Finance Asset;
- Bank Agreement in respect of each Series Transaction;
- Common Terms Agreement;
- Security SPV Guarantee in respect of each Series Transaction;
- Draft Guarantee Custody Agreement;
- Issuer Indemnity in respect of each Series Transaction;
- Note Subscription Agreement in respect of each Series Transaction;
- Programme Agreement in respect of each Series Transaction;
- Security Cession in respect of each Series Transaction;
- Draft Security SPV Guarantee; and
- Transfer Agency Agreement in respect of each Series Transaction.
The credit ratings have been disclosed to the Arranger with no contestation of the ratings.