Johannesburg, 21 August 2017 — Global Credit Ratings (“GCR”) has affirmed the following final, public long-term credit ratings accorded to the following Notes issued by Fox Street 3 (RF) Ltd, (“the Issuer”) and placed the Class D1 Notes on a Positive Outlook:
|●||Class A4 Notes,||stock code FS3A4U;||Stable Outlook;|
|●||Class A5 Notes,||stock code FS3A5;||Stable Outlook;|
|●||Class B1 Notes,||stock code FS3B1;||Positive Outlook;|
|●||Class C1 Notes,||stock code FS3C1U;||Positive Outlook; and|
|●||Class D1 Notes,||stock code FS3D1U;||Positive Outlook.|
The Transaction has a static Subordinated Loan of R173,787,320 that is unrated.
The credit ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal in a post-enforcement priority of payments, whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal in a post-enforcement priority of payments. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
Fox Street 3 (RF) Limited is a Residential Mortgage Backed Securities (“RMBS”) Securitisation of home loans originated by Investec Bank Limited (“Investec”) to its private banking clients. The Issuer issued unlisted Notes on 20 February 2015. This is Investec’s third Fox Street RMBS transaction. Fox Street 3 (RF) Limited has been established to assist Investec with its committed liquidity facility (“CLF”) to meets its liquidity coverage ratio. GCR has been advised that Investec has sufficient CLF and sold certain Notes. The Arranger added step-up coupons to the Notes and requested an analysis on the Transaction, whilst considering various step-up rates – the step-up date is 20 February 2020. The analysis found that there will be no impact on the ratings that were affirmed and upgraded on 15 December 2016, with the proposed step-up coupons that were added to the Notes in issuance. The stock codes changed from FS3A5U to FS3A5 and FS3B1U to FS3B1.
The portfolio principal outstanding decreased from R1,667,295,393 at April 2016 to R1,446,048,276 at April 2017. GCR calculated an annual portfolio net repayment rate of 13.27% for the year ending 30 April 2017.
GCR did not adjust the Weighted Average Default Frequency (“WADF”) or the Weighted Average Recovery Rate (“WARR”) metrics which are still deemed appropriate. GCR calculated a ‘B(ZA)(sf)’ (base case) net loss of 1.04% as at December 2015.
As at April 2017, the home loan portfolio had a Weighted Average Current Loan to Value ratio of 59.28% (April 2016: 69.18%) and a Weighted Average Debt to Income ratio of 21.37% (April 2016: 21.45%). At April 2017, the portfolio had a Weighted Average Asset Yield to Prime of -1.29% (April 2016: -1.29%), a Weighted Average Seasoning of 5.89 years (April 2016: 4.88 years) and a Weighted Average Term to Maturity of 14.57 years (April 2016: 15.19 years).
The Transaction reported a high non-owner occupied properties exposure of 45.79% (April 2016: 36.60%). The majority of the properties are situated in Gauteng at 55.00% (April 2016: 54.61%) and Western Cape at 30.45% (April 2016: 31.42%) of the portfolio principal balance outstanding respectively.
All of the Capital Reserve, Liquidity Reserve, Mortgage Bond Registration Costs Reserve and Redraw Reserve were maintained at their required amounts.
|Class A4 Notes|
|Class A5 Notes|
|Class B1 Notes|
|Class C1 Notes|
|Class D1 Notes|
|Class A4 Notes|
|Class A5 Notes|
|Class B1 Notes|
|Class C1 Notes|
|Class D1 Notes|
Senior Structured Finance Analyst
+27 11 784 1771
Sector Head: Structured Finance Ratings
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Structured Finance Rating Criteria – Feb ’17,
Global Residential Mortgage Backed Securities Rating Criteria – May ’17,
Fox Street 3 (RF) Ltd Surveillance Report Dec ’16 and
Investec Bank Limited Financial Institution ratings – Oct ’16.
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.
|Ageing||The age of an asset or obligation.|
|Arranger||Usually an Investment bank that advises and constructs a transaction and acts as a conduit between the transaction parties: Client, Issuer, Credit Rating Agency, Investors, Legal Counsel and Servicers.|
|Asset||An item with economic value that an entity owns or controls.|
|Bond||A long term debt instrument issued by either: a company, institution or the government to raise funds.|
|Capital||The sum of money that is used to generate proceeds.|
|Coupon||Interest payment on a security.|
|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.|
|Exposure||Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on one source of funding.|
|Income||Money received, especially on a regular basis, for work or through investments.|
|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.|
|Liquidity||The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity.|
|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.|
|Loss||A tangible or intangible, financial or non-financial loss of economic value.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Private||An issuance of securities without market participation, however, with a select few investors. Placed on a private basis and not in the open market.|
|Recovery||The action or process of regaining possession or control of something lost. To recoup losses.|
|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.|
|Seasoning||The age of an asset, the time period passed since origination.|
|Securities||Various instruments used in the capital market to raise funds.|
|Securitisation||Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.|
|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.|
|Subordinated Loan||A loan typically given by the Issuer to the securitisation vehicle that is more junior than a junior tranche.|
|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.|
|Weighted||The weight that a single obligation has in relation to the aggregated pool of obligations. For example, a single mortgage principal balance divided by the aggregated mortgage pool principal balance.|
|Weighted Average||An average resulting from the multiplication of each component by a factor reflecting its importance or, relative size to a pool of assets or liabilities.|
|Yield||Percentage return on an investment or security, usually calculated at an annual rate.|
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings were 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 ratings 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 credit rating/s has been disclosed to the Arranger with no contestation of the ratings.
GCR has received the updated Programme Memorandum and the Applicable Pricing Supplements for the FS3A4U, FS3A5, FS3B1, FS3C1U and FS3D1U Notes.
The ratings above were solicited by, or on behalf of the rated client, and therefore, GCR has been compensated for the provision of the ratings.