Announcements

Commissioner Street No. 4 (RF) Ltd – Ratings Affirmed

Johannesburg, 30 November 2017 — Global Credit Ratings (“GCR”) has affirmed the final, public long-term credit ratings of the below mentioned senior secured credit linked notes (“Notes”) issued by the Issuer on 10 October 2011 and maintained a Positive Outlook.

Class A-4 Notes stock code MEFSA4 R250,000,000 due 5 January 2019 AA(ZA)(sf) Positive Outlook

  • Class A-4 Notes stock code MEFSB4 R65,000,000 due 5 January 2019 AA(ZA)(sf) Positive Outlook

  • Class A-5 Notes stock code MEFSB5 R215,000,000 due 5 January 2022 AA(ZA)(sf) Positive Outlook

  • Class A-6 Notes stock code MEFSA6 R465,716,739 due 5 July 2026 AA(ZA)(sf) Positive Outlook

    RATING RATIONALE

    Commissioner Street No. 4 (RF) Ltd (the “Issuer”) acquired the rights, title and interest in two loans (the “Loans”) provided by Absa Bank Limited to eThekwini Municipality (the “Borrower”) through an outright cession. The Loans are both amortising and pay a fixed interest rate. R1.89bn of Notes were issued on 10 October 2011. The Borrower fully settled Loan 1 during September 2017, whilst the remaining portion of Loan 2 (R763m) is still outstanding with a scheduled maturity date of 30 June 2026. The Issuer has the excess of the debt service payments in the Interest Account (R7.1m) and Principal Account (R232.5m).

    The ratings of the Notes are credit linked to the local currency Long-term Public Debt credit rating of the Borrower. The performance of the Notes is predominantly linked to the ability of the Borrower to make payments due under the Loans. The ratings accorded to the Notes relate to timely payment of interest and principal. The ratings excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties. GCR affirmed the national scale Long-term Public Debt rating accorded to eThekwini to ‘AA(ZA)’ on 28 November 2017, and affirmed the ‘A1+(ZA)’ short-term rating, with a Positive Outlook.

    If the rating of the Borrower changes then the rating of the Notes may also change. 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. 4 (RF) Limited Metro Funding Series 2011-1 Surveillance Report published on 30 November 2017.

    RATINGS HISTORY

    Stock code
    Stock code
    Initial Rating
    Long-term Rating
    Short-term Rating
    Outlook
    Class A-4 Notes
    MEFSA4
    7 November 2011
    AA-(ZA)(sf)
    n.a
    Stable
    Class A-4 Notes
    MEFSB4
    7 November 2011
    AA-(ZA)(sf)
    n.a
    Stable
    Class A-5 Notes
    MEFSB5
    7 November 2011
    AA-(ZA)(sf)
    n.a
    Stable
    Class A-6 Notes
    MEFSA6
    7 November 2011
    AA-(ZA)(sf)
    n.a
    Stable
     
     
    Stock code
    Stock code
    Last Rating
    Long-term Rating
    Short-term Rating
    Outlook
    Class A-4 Notes
    MEFSA4
    24 October 2016
    AA(ZA)(sf)
    n.a
    Positive
    Class A-4 Notes
    MEFSB4
    24 October 2016
    AA(ZA)(sf)
    n.a
    Positive
    Class A-5 Notes
    MEFSB5
    24 October 2016
    AA(ZA)(sf)
    n.a
    Positive
    Class A-6 Notes
    MEFSA6
    24 October 2016
    AA(ZA)(sf)
    n.a
    Positive

    ANALYTICAL CONTACTS

    Primary Analyst

    Corné Els

    Senior Structured Finance Analyst

    cornee@globalratings.net

    Secondary Analyst

    Tinashe Mujuru

    Structured Finance Analyst

    TinasheM@globalratings.net

    +27 11 784 1771

    Committee Chairman

    Yohan Assous

    Sector Head: Structured Finance Ratings

    yohan@globalratings.net

    +27 11 784 1771

    APPLICABLE METHODOLOGIES

    Global Credit-Linked Note and Repackaging Vehicle Rating Criteria – May ’17;

    Global Master Criteria For Rating Public Entities – Feb ’17;

    eThekwini Municipality Rating Announcement – Nov ’17;

    Absa Financial Institutions Rating Report – Apr ’17

    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.

    GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY

    Borrower The party indebted or the person making repayments for its borrowings.
    Credit A contractual agreement in which a borrower receives something of value now, and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company
    Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
    Debt An obligation to repay a sum of money.
    Fixed Interest An interest rate that does not change as the repo or reference rate changes.
    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.
    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.
    Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
    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).
    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.
    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.
    Surveillance Process of monitoring a transaction according to triggers, covenants and key performance indicators.
    Timely Payment The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.

    For a detailed glossary of terms utilised in this announcement please click here.


    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 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 Issuer of the Transaction; GCR has been compensated for the provision of the ratings.

    The credit rating/s has been disclosed to the Arranger with no contestation of the rating.

    The information received from the Arranger and other reliable third parties to accord the credit ratings included:

    • A spread sheet detailing the performance triggers;
    • Quarterly investor reports from 5 January 2012 up to 5 October 2017;
    • The Borrower’s financial statements for the year ended 30 June 2016; and
    • The Issuer’s financial statements for the year ended 31 December 2016.

    image_pdf

    Leave a Reply



    ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

    CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

    Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.