Announcements

Fox Street 5 (RF) Limited – Ratings Affirmed, Upgraded and Withdrawn

Johannesburg, 18 July 2018 — Global Credit Ratings (“GCR”) has affirmed and withdrawn the following final, public long-term credit ratings to the following Notes issued by Fox Street 5 (RF) Ltd (the “Issuer”):

Class A3 Notes, stock code FS5A3U;
AAA(ZA)(sf)
Stable Outlook,
Class A4 Notes, stock code FS5A4U;
AAA(ZA)(sf)
Stable Outlook, and
Class A5 Notes, stock code FS5A5U;
AAA(ZA)(sf)
Stable Outlook.

GCR has concurrently upgraded and withdrawn the following final, public long-term credit ratings accorded to the following Notes issued by the Issuer, and revised their outlooks to Stable:

Class B1 Notes, stock code FS5B1U;
AA(ZA)(sf)
Stable Outlook,
Class C1 Notes, stock code FS5C1U;
A(ZA)(sf)
Stable Outlook, and
Class D1 Notes, stock code FS5D1U;
BBB+(ZA)(sf)
Stable 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 withdrawal of the ratings is at the request of Investec Bank Limited.

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 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 R2,429,533,784 at March 2017 to R2,219,666,152 at March 2018, representing an annual net repayment rate of 8.6% for the year ending March 2018.

The sequential order of payment caused the Credit Enhancement of the Notes to increase. The Class A3 Notes Credit Enhancement increased by 8.8% in absolute percentage terms to 80.9% over the period 20 April 2017 to 20 April 2018 (the last quarterly payment date). Similarly, the Class A4 Notes reported a 3.2% increase to 29.0%, the Class A5 Notes a 2.7% increase to 24.9%, the Class B1 Notes a 2.1% increase to 18.9%, the Class C1 Notes a 1.7% increase to 15.3% and the Class D1 Notes a 1.5% increase to 13.4%.

Cumulative defaults (>90 days in arrears) were reported at March 2018 at R5,443,745 (four accounts), or 0.19% of the original portfolio. One of these accounts had been rehabilitated, resulting in a closing balance of defaults of R4,153,414.

The Transaction had three accounts (R6,613,743) in early arrears (<90 days) at 31 March 2018.

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.

Investec reported a Weighted Average Current Loan-to-Value ratio for the home loan portfolio at March 2018 of 68.2% (Mar ‘17: 61.9%), a Weighted Average Debt to Income ratio of 22.3% (Mar ‘17: 22.7%), a Weighted Average Asset Yield to Prime of -1.05% (Mar ‘17: -1.06%), a Weighted Average Seasoning of 4.78 years (Mar ‘17: 3.82 years) and a Weighted Average Term to Maturity of 15.56 years (Mar ‘17: 16.22 years).

As at March 2018, Investec reported the majority of properties as being situated in Gauteng at 60.7% (Mar ‘17: 61.3%) and Western Cape at 28.2% (Mar ‘17: 27.6%) 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 respective required amounts.

RATINGS HISTORY

Security class
Stock code
Initial Rating
Long-term Rating
Outlook
Last Rating
Long-term Rating
Outlook
Class A3 Notes
FS5A3U
20 April 2016
AAA(ZA)(sf)
Stable
30 June 2017
AAA(ZA)(sf)
Stable
Class A4 Notes
FS5A4U
20 April 2016
AAA(ZA)(sf)
Stable
30 June 2017
AAA(ZA)(sf)
Stable
Class A5 Notes
FS5A5U
20 April 2016
AA(ZA)(sf)
Stable
30 June 2017
AAA(ZA)(sf)
Stable
Class B1 Notes
FS5B1U
20 April 2016
A(ZA)(sf)
Stable
30 June 2017
AA-(ZA)(sf)
Positive
Class C1 Notes
FS5C1U
20 April 2016
BBB(ZA)(sf)
Stable
30 June 2017
A-(ZA)(sf)
Positive
Class D1 Notes
FS5D1U
20 April 2016
BBB-(ZA)(sf)
Stable
30 June 2017
BBB(ZA)(sf)
Positive

ANALYTICAL CONTACTS

Primary Analyst Secondary Analyst
Corné Els Yehuda Markovitz
Senior Structured Finance Analyst Structured Finance Analyst
+27 11 784 1771 +27 11 784 1771
CorneE@globalratings.net yehudam@globalratings.net

Committee Chairperson

Yohan Assous

Sector Head: Structured Finance Ratings

+27 11 784 1771

yohan@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 ’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

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.
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.
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).
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.
Security An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.
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.
Yield Percentage return on an investment or security, usually calculated at an annual rate.
   

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 December 2017 pool cut and the quarterly Investor Reports (20 July 2017, 20 October 2017, 22 January 2018 and 20 April 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.

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