Announcements

Fox Street 5 (RF) Limited – Ratings Affirmed and Upgraded

Johannesburg, 30 June 2017 — Global Credit Ratings (“GCR”) has affirmed the following final, public long-term credit ratings to the following Notes issued by Fox Street 5 (RF) Ltd (“the Issuer”):

Class A2 Notes, stock code FS5A2U;
AAA(ZA)(sf)
Stable Outlook,
Class A3 Notes, stock code FS5A3U;
AAA(ZA)(sf)
Stable Outlook, and
Class A4 Notes, stock code FS5A4U;
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 accorded a Positive Outlook to the Class B1 Notes, Class C1 Notes and Class D1 Notes:

Class A5 Notes, stock code FS5A5U;
AAA(ZA)(sf)
Stable Outlook,
Class B1 Notes, stock code FS5B1U;
AA-(ZA)(sf)
Positive Outlook,
Class C1 Notes, stock code FS5C1U;
A-(ZA)(sf)
Positive Outlook, and
Class D1 Notes, stock code FS5D1U;
BBB(ZA)(sf)
Positive Outlook.

The Issuer has Class E1 Notes of R240,000,000 and a Subordinated Loan of R70,822,415.52, which are both 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 5 (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 the listed Notes on 20 April 2016. This is Investec’s fifth Fox Street RMBS transaction. Investec previously had other RMBS transactions under the Private Residential Mortgages and Private Mortgages programmes.

The portfolio principal outstanding decreased from R2,800,822,416 at March 2016 to R2,487,458,585 at March 2017. GCR calculated an annual net repayment rate of 11.19% (portfolio balance: R2,800,822,416 at March 2016) for the year ending 31 March 2017.

Investec’s bespoke private banking client base resulted in low cumulative defaults. The cumulative defaults reported on Investec’s home loan book at October 2016, per >90 days and >180 days ageing buckets, averaged at 2.0% with the 2008 vintages peaking at 6.0% and 3.7% respectively. 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 1.36% as at March 2016.

None of the Transaction’s Stop Purchase or Servicer Default Events occurred since the initial ratings were accorded in April 2016. The Transaction had four accounts in arrears at 31 March 2017. These four accounts had a Weighted Average Current Loan to Value of 85.67% (total arrears balance of R100,575). As at March 2017, the home loan portfolio had a Weighted Average Current Loan to Value ratio of 61.9% (Mar ’16: 70.9%) and a Weighted Average Debt to Income ratio of 22.7% (Mar ’16: 19.7%). At March 2017 the portfolio had a Weighted Average Asset Yield to Prime of -1.06% (Mar ’16: -1.10%), a Weighted Average Seasoning of 3.82 years (Mar ’16: 3.31 years) and a Weighted Average Term to Maturity of 16.22 years (Mar ’16: 16.57 years). The majority of the properties are situated in Gauteng at 61.3% (Mar ’16: 60.0%) and Western Cape at 27.5% (Mar ’16: 29.0%) of the portfolio principal balance outstanding respectively.

All of the Capital Reserve, Liquidity Reserve, Mortgage Bond Registration Costs Reserve and Redraw Reserve required amounts were maintained.

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 A2 Notes
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
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)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
Class A5 Notes
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AA+(ZA)(sf)
Class B1 Notes
AA-(ZA)(sf)
A+(ZA)(sf)
A(ZA)(sf)
AA-(ZA)(sf)
A+(ZA)(sf)
A(ZA)(sf)
A-(ZA)(sf)
Class C1 Notes
A-(ZA)(sf)
BBB+(ZA)(sf)
BBB(ZA)(sf)
A-(ZA)(sf)
BBB+(ZA)(sf)
BBB(ZA)(sf)
BBB-(ZA)(sf)
Class D1 Notes
BBB(ZA)(sf)
BBB-(ZA)(sf)
BBB-(ZA)(sf)
BBB(ZA)(sf)
BBB-(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 A2 Notes
FS5A2U
20 April 2016
AAA(ZA)(sf)
n.a
Stable
Class A3 Notes
FS5A3U
20 April 2016
AAA(ZA)(sf)
n.a
Stable
Class A4 Notes
FS5A4U
20 April 2016
AAA(ZA)(sf)
n.a
Stable
Class A5 Notes
FS5A5U
20 April 2016
AA(ZA)(sf)
n.a
Stable
Class B1 Notes
FS5B1U
20 April 2016
A(ZA)(sf)
n.a
Stable
Class C1 Notes
FS5C1U
20 April 2016
BBB(ZA)(sf)
n.a
Stable
Class D1 Notes
FS5D1U
20 April 2016
BBB-(ZA)(sf)
n.a
Stable

ANALYTICAL CONTACTS

Corné Els

Senior Structured Finance Analyst

+27 11 784 1771

CorneE@globalratings.net

Committee Chairperson

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 ’17,

Global Residential Mortgage Backed Securities Rating Criteria – May ’17,

Fox Street 5 (RF) Ltd New Ratings Report – Apr ’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.

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

Ageing The age of an asset or obligation.
Arrears General term for non-performing obligations, i.e. obligations that are overdue.
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.
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.
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.

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 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 ratings 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 credit ratings have been disclosed to the Arranger with no contestation of the ratings.

GCR received the March 2017 pool cut and the quarterly Investor Reports (20 July 2016, 20 October 2016, 20 January 2016 and 20 March 2017).

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.

image_pdfPDF View

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 2019 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.