Announcements

Fox Street 4 (RF) Limited – Ratings Affirmed and Upgraded

Johannesburg, 8 December 2016 — Global Credit Ratings (‘GCR’) has affirmed the following final, public long-term credit ratings of the following Notes Issued by Fox Street 4 (RF) Ltd, (‘the Issuer’):

Class A3 Notes, stock code FS4A3U;
AAA(ZA)(sf)
Stable Outlook; and
Class A4 Notes, stock code FS4A4U;
AAA(ZA)(sf)
Stable Outlook.

GCR concurrently upgraded the following final, public long-term credit ratings accorded to the following Notes Issued by the Issuer and placed the Class B1 and C1 Notes on a Positive Outlook:

Class A5 Notes, stock code FS4A5U;
AAA(ZA)(sf)
Stable Outlook;
Class B1 Notes, stock code FS4B1U;
A+(ZA)(sf)
Positive Outlook; and
Class C1 Notes, stock code FS4C1U;
A-(ZA)(sf)
Positive Outlook.

GCR furthermore affirmed the following final, public long-term credit ratings accorded to the following Notes Issued by the Issuer and placed the Class D1 Notes on a Positive Outlook:

Class D1 Notes, stock code FS4D1U;
BBB(ZA)(sf)
Positive Outlook.

The Transaction has a Subordinated Loan of R422,905,567 that is unrated.

The credit ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal, whilst the ratings on all other securities relate to ultimate 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.

RATING RATIONALE

Fox Street 4 (RF) Ltd is a Residential Mortgage Backed Securities (‘RMBS’) Securitisation of home loans originated by Investec Bank Ltd (‘Investec’) to its private banking clients. The Issuer issued unlisted Notes on 20 March 2015. This is Investec’s fourth Fox Street RMBS transaction. Investec’s bespoke private banking client base resulted in low cumulative defaults. The reported cumulative defaults per >90 days and >180 days buckets peaked from home loans originated in 2008 at 6.0% and 3.7% respectively.

The Issuer repaid the R400m FS4A1U Notes on 21 December 2015 and the R400m FS4A2U Notes on 20 September 2016. The portfolio principal outstanding decreased from R3,652,058,823 at August 2015 to R3,053,302,702 at October 2016.

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)’ net loss of 1.23% as at December 2015.

None of the Transaction’s Stop Purchase or Servicer Default Events occurred over the past 12 months. The Transaction had R13.8m (10 accounts) in early arrears (weighted average arrears of 1.39 months) with a median Current Loan to Value of 77.1% as at October 2016. All of the Capital Reserve, Liquidity Reserve, Mortgage Bond Registration Costs Reserve and Redraw Reserve required amounts were maintained.

The Transaction reported an annualised pre-payment rate of 10.3% (measured from Transaction close to 31 August 2016). The Transaction has a relatively high non-owner occupied properties exposure at 34.5%. The majority of the properties are situated in Gauteng at 59.3% and Western Cape at 25.2%.

As at October 2016, the home loan portfolio had a Weighted Average Current Loan to Value ratio of 71.5% (Aug ’15: 73.02%) and a Weighted Average Debt to Income ratio of 17.1% (Aug ’15: 18.09%).

RATING SENSITIVITY

Security class
Long Term Rating
15% Increase of WADF
30% Increase of WADF
15% Decrease of WARR
30% Decrease of WARR
15% Increase of WADF and 15% Decrease of WARR
30% Increase of WADF and 30% Decrease of WARR
Class A3 Notes
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
Class A4 Notes
AAA(ZA)(sf)
AAA(ZA)(sf)
AA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AA+(ZA)(sf)
A+(ZA)(sf)
Class A5 Notes
AAA(ZA)(sf)
AA+(ZA)(sf)
AA-(ZA)(sf)
AAA(ZA)(sf)
AA+(ZA)(sf)
AA(ZA)(sf)
A(ZA)(sf)
Class B1 Notes
A+(ZA)(sf)
A (ZA)(sf)
BBB+(ZA)(sf)
A+(ZA)(sf)
A(ZA)(sf)
A-(ZA)(sf)
BBB-(ZA)(sf)
Class C1 Notes
A-(ZA)(sf)
BBB(ZA)(sf)
BBB-(ZA)(sf)
BBB+(ZA)(sf)
BBB(ZA)(sf)
BBB-(ZA)(sf)
BB(ZA)(sf)
Class D1 Notes
BBB(ZA)(sf)
BB+(ZA)(sf)
BB(ZA)(sf)
BBB-(ZA)(sf)
BB+(ZA)(sf)
BB+(ZA)(sf)
BB-(ZA)(sf)

RATINGS HISTORY

Security class
Stock code
Initial and Last Rating
Long Term Rating
Short Term Rating
Outlook
Class A3 Notes
FS4A3U
9 December 2015
AAA(ZA)(sf)
n.a
Stable
Class A4 Notes
FS4A4U
9 December 2015
AAA(ZA)(sf)
n.a
Stable
Class A5 Notes
FS4A5U
9 December 2015
AA+(ZA)(sf)
n.a
Stable
Class B1 Notes
FS4B1U
9 December 2015
A(ZA)(sf)
n.a
Stable
Class C1 Notes
FS4C1U
9 December 2015
BBB+(ZA)(sf)
n.a
Stable
Class D1 Notes
FS4D1U
9 December 2015
BBB(ZA)(sf)
n.a
Stable

ANALYTICAL CONTACTS

Corné Els

Senior Structured Finance Analyst

+27 11 784 1771

CorneE@globalratings.net

Committee Chairman

Emma-Jane Fulcher

Sector Head: Structured Finance Ratings

+27 11 784 1771

fulcher@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Structured Finance Rating Criteria – Feb ’16,

Global Residential Mortgage Backed Securities Rating Criteria – May ’16,

Fox Street 4 (RF) Ltd New Ratings Report – Dec ’15, 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.

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

Arrears General term for non-performing obligations, i.e. obligations that are overdue.
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.
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 90 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.
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.
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.
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.
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.


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 was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings was 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 received the Loan Book as at 31 October 2016 and the Quarterly Investor reports (21 December 2015, 22 March 2016, 20 June 2016 and 20 September 2016).

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.

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