Announcements

GCR accords final, public ratings to Global Equity Investments 1-10 Limited ZAR Denominated Redeemab

Johannesburg, 30 November 2016 — Global Credit Ratings (‘GCR’) has accorded final, public long term international scale foreign currency credit ratings and rating outlooks to the following Primary Investment Vehicles trading as Global Equity Investments 1-10 Limited (“GEI”):

Issuer
Underlying Linked Credit
Amount
Long term rating

International Foreign Currency
Rating outlook
Global Equity Investments 1 Limited
Investec Bank Plc Structured Deposit
R9.95m
BBB+(sf)
Stable
Global Equity Investments 2 Limited
Impala Bond – Emirates NBD PJSC
R9.95m
A-(sf)
Stable
Global Equity Investments 3 Limited
Impala Bond – HSBC Bank Plc
R9.95m
AA-(sf)
Stable
Global Equity Investments 4 Limited
Impala Bond – Goldman Sachs Group Inc
R9.95m
A-(sf)
Stable
Global Equity Investments 5 Limited
Impala Bond – UBS AG/Stamford CT
R9.95m
A+(sf)
Stable
Global Equity Investments 6 Limited
Impala Bond – Scottish Widows Ltd
R9.95m
A(sf)
Positive
Global Equity Investments 7 Limited
Impala Bond – Fidelity International Ltd
R9.95m
BBB+(sf)
Stable
Global Equity Investments 8 Limited
Impala Bond – Sasol Financing International PLC
R9.95m
BBB(sf)
Negative
Global Equity Investments 9 Limited
Impala Bond – Old Mutual Plc
R9.95m
BBB-(sf)
Negative
Global Equity Investments 10 Limited
Impala Bond – Barclays Bank Plc
R9.95m
A(sf)
Negative

RATING RATIONALE

The Issuer will issue Rand denominated redeemable shares (the ‘PIV Shares’) to a specific institutional investor (the ‘CIS Client’) in South Africa, on a private basis. The proceeds from each tranche of the PIV Shares subscribed to will be utilised to subscribe for redeemable equity shares (the ‘Cell Shares’) issued by a constituent cell of a protected cell company, Global Equity Investments PCC (each a ‘Cell’ and the ‘Protected Cell Issuer’ respectively), incorporated in Mauritius with a Category I Global Business License. The Protected Cell Issuer will in turn use the proceeds of the subscription in the Cell Shares to invest in a range of rated global investment opportunities (the “Cell Investments”), with the primary objective of preserving capital while providing consistent superior risk adjusted returns to its investors, subject to investor appetite.

The PIV Shares were issued for a cash consideration on 29 November 2016. The proceeds of the PIV Shares were used to subscribe for Cell Shares, which in turn are to be invested in the Cell Investments which comprised either a Structured Deposit from Investec Bank Plc or an Impala Bond from Investec Bank Plc aligned to the CIS’s credit risk appetite. Any profits realised by the Cell pursuant to the Cell Investment are to be distributed as dividends to the PIV Shareholders of each Cell. Profits of any Cell will be equal to any revenue received from the Cell Investments, less the agreed fees and statutory taxes payable.

The Cell will in turn grant the CIS Client a Put Option whereby the CIS Client can put the PIV Shares to the Cell for its capital value plus any declared but unpaid dividends. As security for this payment obligation, the Cell will grant the CIS Client an English law charge over its cash accounts and/or custody accounts held in the name of the Cell. Therefore, the CIS Client would ultimately bear the credit risk of the assets held in the accounts in the event that the Cell fails to perform under the Put Option.

In the event of a default event as described in the terms and conditions of the PIV Shares, the CIS Client can exercise its irrevocable and unconditional Put Option in their favour allowing the CIS Client/PIV Shareholder to sell its shareholding in the PIV Shares to the respective Cell. The price payable for the PIV Shares in respect of which the Put Option will be exercised shall be the aggregate Principal Amount plus any declared but unpaid dividends in respect of those shares.

Therefore, the PIV Shareholder/CIS Client will rely on the Put Option which is in turn secured by the Deed of Charge which allows for direct recourse to the underlying assets of the relevant Cell held in its cash and custody accounts in order to secure timely payment of accrued dividends and principal on the PIV Shares thereby intrinsically linking the credit risk of the Underlying Linked Credit to the credit risk of the PIV Shares. The rating on the PIV Shares can thus be credit linked to the credit rating of the Underlying Linked Credit.

The underlying entity or underlying linked credit for the above listed Issuers are investment grade rated entities, rated by at least one of the larger international rating agencies or GCR. GCR applied its rating mapping approach to determine the intrinsically linked credit risk and thus rating to be accorded to the ZAR Denominated Redeemable Ordinary Share(s) as listed above. GCR has sourced and received legal opinions for all jurisdictions involved namely, South Africa, England, Mauritius and Singapore which were in turn reviewed by Norton Rose Fulbright UK. GCR also received a Tax Opinion on the structure which was prepared by Norton Rose Fulbright South Africa and reviewed by Senior Tax Council. For more information, please read the Global Equity Investments 1-10 Limited ZAR Denominated Redeemable Ordinary Share(s) New-Issuance Report(s) to be published on 30 November 2016.

The final, public credit ratings accorded to the Global Equity Investments 1-10 Primary Investment Vehicles’ ZAR Denominated Redeemable Ordinary Shares relates to timely payment of any dividends accrued and principal.

RATINGS HISTORY

Issuer
Initial / Last rating
Long term rating

International Foreign Currency
Rating outlook
GEI 1
New
BBB+(sf)
Stable
GEI 2
New
A-(sf)
Stable
GEI 3
New
AA-(sf)
Stable
GEI 4
New
A-(sf)
Stable
GEI 5
New
A+(sf)
Stable
GEI 6
New
A(sf)
Positive
GEI 7
New
BBB+(sf)
Stable
GEI 8
New
BBB(sf)
Negative
GEI 9
New
BBB-(sf)
Negative
GEI 10
New
A(sf)
Negative

ANALYTICAL CONTACTS

Primary Analyst

Mark Vrdoljak

Senior Credit Analyst

+27 11 784 1771

markvrd@globalratings.net

Secondary Analyst

Tinashe Mujuru

Junior Analyst

+27 11 784 1771

tinashem@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 Credit Linked Note and Repackaging Vehicle Rating Criteria – May ’16 ;

Global Master Structured Finance Rating Criteria, updated Feb ’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.

SALIENT FEATURES OF INDICATIVE RATINGS ACCORDED

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 Arranger, CapitalN, 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 of the Transaction; GCR has been compensated for the provision of the ratings.

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

Information received from the Arranger

Final, signed copies of the following were received:

  • PIV Constitution.
  • PIV Shares Offer Document.
  • Terms and Conditions of the PIV Shares.
  • PIV Share Subscription Form.
  • PCC Constitution.
  • PCC Shares Offer Document.
  • Terms and Conditions of the PCC Shares.
  • PCC Share Subscription Form.
  • Deed of Charge over Investec Bank Plc Structured Deposit.
  • Put Option Agreement.
  • Paying Agency Agreement.
  • ISDA Schedule.
  • Custodian Agreement.
  • Account Control Agreement.
  • Singapore counsel legal opinion.
  • London counsel legal opinion.
  • Mauritian counsel legal opinion.
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