Johannesburg, 10 November 2016 — Global Credit Ratings (‘GCR’) has affirmed the final, public long-term credit rating of ‘A(ZA)(sf)’ with a Stable outlook accorded to the following Notes:
|R47,625,961||Class A2 Notes, EFS0A2, interest at 3M JIBAR + 3.00%, due 28 October 2023.|
Concurrently, GCR has affirmed the final, public long term credit rating of ‘BBB(ZA)(sf)’ with a Stable outlook accorded to the following Notes:
|R15,648,530||Class B Notes, EFS00B, interest at 3M JIBAR + 5.50%, due 28 October 2023.|
The Transaction also has Class C Notes (EFS0CU) that are unrated.
The ratings accorded to the abovementioned Class A2 and Class B Notes (collectively the Senior Notes) relate to the timely payment of interest and ultimate payment of principal. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
The Transaction is a securitisation of rescheduled and previously non-performing debt agreements (‘Sold Claims’) sold by Real People (Pty) Ltd to the Issuer. The debt agreements (unsecured) were previously non-performing and were either: debt that was acquired from third parties; educational loans originated from the Aspire Group’s operations, loans originated from the Real People Home Finance business or General Purpose Loans (‘GPL’) originated through the discontinued Real People branch network.
The Transaction’s performance depends on the Servicer’s ability to collect on the rescheduled debt agreements. Real People Investment Holdings Ltd (‘RPIH’) currently has a Special Servicer Quality rating of ‘SQ2+(ZA)’, Stable outlook and the Servicer Agreement warrants for the replacement of RPIH with a Back-up Servicer in the event of a downgrade of the special servicer rating to below ‘SQ2-(ZA)’. RPIH is currently rated ‘BB+(ZA)’ and ‘B(ZA)’ with a Stable outlook on GCR’s long-term and short-term national scale respectively. The Transaction is repaying ahead of schedule. On average, the Actual Cumulative Receipting is 22.3% higher than the Expected Cumulative Receipting since Transaction Closing. On a monthly basis, the actual receipting reported in September 2016 exceeded the month to month expected receipting by 28.7% up from 16.9% reported in August 2016 and higher than the average since Transaction Closing of 21.3%. GCR previously calculated R3.5m worth of reversed debit orders, or 3.6% of the October 2015 to March 2016 expected receipts. GCR was advised that this was due to rescheduled contracts that were marked as inactive and were incorrectly removed from the data provided. GCR was further advised that such debtors’ accounts may be marked as active again, in the event that the right party is contacted and another successful debt contract is renegotiated.
The Notes are amortising from the first Payment Date of 28 January 2016. The most recent quarterly principal repayment of the Notes occurred on 28 October 2016 (R17.8m of the Class A2 Notes, R5.8m of the Class B Notes and R6.1m of the Class C Notes). Following this principal repayment, 34% of the original Notes issued remains outstanding.
In line with the above, the four loan books performed above expectations with actual receipting from the Acquired, Education, GPL and Home Finance books exceeding the expected monthly receipting by 17.9%, 16.4%, 43.9% and 56.7% respectively, as at the end of September 2016.
All receivables are collected directly into the Issuer’s bank account held at the Standard Bank of South Africa Ltd, which is currently rated ‘AA+(ZA)’ and ‘A1+(ZA)’ on GCR’s long term and short term national scale respectively. The Servicer mitigates any commingling risk resulting from any payments that are made via direct deposit into the Servicer’s accounts, through the bi-monthly transfer of all such deposits from the Servicer’s accounts to the Issuer’s bank account.
Senior Structured Finance Analyst
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Sector Head: Structured Finance Ratings
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Structured Finance Rating Criteria – Feb ’16;
Global Consumer Asset Backed Securitisation Rating Criteria – Apr ’16;
A tailored stressed collections approach;
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.|
|Claim||A formal request or demand.|
|Commingling||The mixing of various transaction parties’ funds in an account.|
|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.|
|Default||A default occurs when: 1.) The Borrower is unable to repay its debt obligations in full; 2.) A credit-loss event such as charge-off, specific provision or distressed restructuring involving the forgiveness or postponement of obligations; 3.) The borrower is past due more than X days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.|
|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.|
|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.|
|Payment Date||The date on which the payment of a coupon is made.|
|Performing||An obligation that performs according to its contractual obligations.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Receivables||General term for economic benefit derived from an asset.|
|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.|
|Securitisation||Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.|
|Senior||A security that has a higher repayment priority than junior securities.|
|Servicer||A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.|
|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.|
|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.|
|Ultimate Payment||A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.|
SALIENT FEATURES OF ACCORDED RATINGS
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 Issuer and 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 Arranger and Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The credit ratings have been disclosed to the Arranger and Issuer with no contestation of the ratings.
The information received from the Arranger / Issuer:
- Historical collections data for the four loan books, each segmented into different ageing buckets based on the term of the loans;
- Actual collections data from October 2015 to September 2016; and
- Quarterly Investor Reports from January 2016 to October 2016.