Johannesburg, 13 December 2017 — Global Credit Ratings (“GCR”) has accorded final, public long-term credit ratings and rating outlooks to the following Series 3 Notes issued by the South African Securitisation Programme (RF) Limited (“SASP” or “SASP Series 3”):
ZAR357m, Class A3, stock code SLRA3, interest at 3M JIBAR + 1.50%, due 15 November 2025: .……….…….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR125m, Class A4, stock code SLRA4, interest at 3M JIBAR + 1.75%, due 15 November 2025: .…….……….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR 31m, Class B3, stock code SLRB3, interest at 3M JIBAR + 2.25%, due 15 November 2025: ..…..….……… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 37m, Class B4, stock code SLRB4, interest at 3M JIBAR + 2.30%, due 15 November 2025: ..……………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 25m, Class C3, stock code SLRC3, interest at 3M JIBAR + 2.68%, due 15 November 2025: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
ZAR 25m, Class C4, stock code SLRC4, interest at 3M JIBAR + 2.90%, due 15 November 2025: .…….……… ‘BBB(ZA)(sf)’, Outlook Stable.
Concurrently, GCR has affirmed the final, public long-term credit ratings of the Notes previously issued by SASP 3:
ZAR259m, Class A1, stock code SLRA1, interest at 3M JIBAR + 1.73%, due 15 November 2025: .…………….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR276m, Class A2, stock code SLRA2, interest at 3M JIBAR + 1.98%, due 15 November 2025: .…………….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR 30m, Class B1, stock code SLRB1, interest at 3M JIBAR + 2.13%, due 15 November 2025: ..……………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 45m, Class B2, stock code SLRB2, interest at 3M JIBAR + 2.23%, due 15 November 2025: ..……………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 35m, Class C1, stock code SLRC1, interest at 3M JIBAR + 2.94%, due 15 November 2025: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
ZAR 20m, Class C2, stock code SLRC2, interest at 3M JIBAR + 3.15%, due 15 November 2025: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
The final, public credit ratings accorded to the ‘Class A Notes’ relate to timely payment of interest and ultimate payment of principal by the Legal Maturity Date, whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal by the Legal Maturity Date. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
SASP Series 3 is a public securitisation of rental and lease financed assets, originated by Sasfin, Fintech Receivables (FR2), Fintech Underwriting (FUN), Sunlyn and other entities approved by Sasfin (FUN and /or Sasfin will be originators until such time as FR2 unwinds). The programme allows the Issuer to issue individual tranches of notes in separate series; the liabilities and assets of each series will be completely segregated and the secured creditors of one series will not have recourse to the assets of any other series. The Class A Notes, Class B Notes and Class C Notes (collectively the “Series 3 Notes”) were issued under SASP Series 3 (the “Transaction”). SASP has issued notes under other series, SASP Series 1 and SASP Series 2, whose assets (the “Series 1 Assets” and “Series 2 Assets”), respectively, and liabilities are completely segregated from the assets of SASP Series 3 (the “Series 3 Assets”). The notes issued under SASP Series 1 and SASP Series 2 are also rated by GCR.
The proceeds of the note issuance were used to fund the SASP Series 3 portfolio of equipment lease receivables and the associated equipment. The Issuer also drew down R107.2m in the form of a Subordinated Loan. A NPL/Legal Reserve was present on the Tap issuance date of SASP 3. The NPL/Legal Reserve has reduced to an amount of R19.9m and is funded by a dedicated Subordinated Loan (the “NPL Subordinated Loan”). Further to the aforementioned reserve, the Transaction benefits from a First Loss Loan amounting to R12.7m which will be used along with a portion of the Subordinated Loan to fund the Reserve Fund initially, which is expected to equate to 1% of the Outstanding Notes Principal. Sasfin will maintain an Arrears Reserve amounting to the sum of the NPV of the delinquent leases at any point.
The current minimum level of overcollateralisation in the structure (the aggregate amount of Series 3 Assets less the aggregate amount of outstanding Series 3 Notes being equal or higher than 8% of the outstanding Series 3 Notes) would not be sufficient to sustain the ratings of certain notes following the tap issuance. Accordingly an amount of subordinated loan is provided in excess of the minimum ratio to increase the overcollateralisation. Should this excess not be maintained, rating action may be taken by GCR.
GCR reviewed the performance of leases originated by Fintech and Sasfin for the period from June 2002 to October 2017 and determined default and recovery base cases in line with GCR’s Global Consumer ABS Criteria. GCR then determined the appropriate stress levels for each rating band and tested the credit enhancement provided to each tranche of the Series 3 Notes for the respective rating levels. GCR relied on a cash flow model to determine if the cash flow from the securitised portfolio would be sufficient to service the Transaction at all the relevant rating levels. For more information, please read the South African Securitisation Programme (RF) Limited Series 3 New Issuance Report to be published in December 2017.
# New ratings
|Primary Analyst||Secondary Analyst|
|Mark Vrdoljak||Tinashe Mujuru|
|Senior Structured Finance Analyst||Structured Finance Analyst|
|+27 11 784 1771||+27 11 784 1771|
|Sector Head: Structured Finance Ratings|
|+27 11 784 1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’17;
Global Consumer Asset Backed Securitisation Rating Criteria – May ’17; and
GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – May ’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.
|Arrears||General term for non-performing obligations, i.e. obligations that are overdue.|
|Arrears Reserve||An accounting provision made in a reserve fund for arrears.|
|Asset||An item with economic value that an entity owns or controls.|
|Cash Flow||A financial term for monetary changes in operations, investing and financing activities.|
|Credit Enhancement||Limited protection to a transaction against losses arising from the assets. The credit enhancement can be either internal or external. Internal credit enhancement may include: Subordination; over-collateralisation; excess spread; security package; arrears reserve; reserve fund and hedging. External credit enhancement may include: Guarantees; Letters of Credit and hedging.|
|Creditor||A credit provider that is owed debt obligations by a debtor.|
|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.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Lease||Agreement or temporary use and enjoyment of a corporeal thing (movable or immovable property) the whole or part thereof for rent. The essential elements of a contract of lease are: 1.) Undertaking of lessor to give the lessee the use and enjoyment of something; 2.) Agreement between the lessor and lessee that the lessee’s right to use and enjoyment is temporary; and 3.) Lessee’s undertaking to pay a sum or rent.|
|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.|
|Originator||An entity that created assets and hold on balance sheet for securitisation purposes.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Proceeds||Funds from issuance of debt securities or sale of assets.|
|Receivables||General term for economic benefit derived from an asset.|
|Recourse||A source of help in a difficult situation.|
|Recovery||The action or process of regaining possession or control of something lost. To recoup losses.|
|Rent||Payment from a lessee to the lessor for the temporary use of an asset.|
|Reserve Fund||A funded account available for use by a Special Purpose Vehicle for one or more specified purposes. A reserve fund is often used as a form of credit enhancement. Typically accumulated over time, through excess cash flows.|
|Secured Creditor||A creditor that has specific assets pledged as collateral that will receive the proceeds in the event of default.|
|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.|
|Senior||A security that has a higher repayment priority than junior securities.|
|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.|
|Tranche||In a structured finance, a slice or portion of debt securities offered that is structured or grouped to resemble the same degree of risk associated with the underlying asset or with a similar degree of risk. A junior tranche has a higher degree of default risk than a senior tranche.|
|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.|
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings process 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 Issuer and 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 ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The credit ratings have been disclosed to the Issuer and the Arranger with no contestation of the ratings.
The information received from the Arranger and other reliable third parties to accord the credit ratings included:
- Static Loss Data for the period between Q3 2008 and Q3 2017.
- Static Loss Recovery Data for the period between Q3 2008 and Q3 2017.
- Monthly prepayment rates for the period between February 2004 and September 2017.
- An overview of the cut off pool as at 6 December 2017.
- An overview of the expected monthly senior costs for the Issuer.
- Audited financial statements relating to the Issuer per 30 June 2017.
- Signed Legal Opinion.
- Final, signed bring-down Legal Opinion.
- Final, signed Tax Opinion.
- Final, signed Applicable Pricing Supplements.
- Template Lease Agreements.
- Findings of GCR’s SASP Servicer Review in November 2016 as well as minutes of follow on operational review update calls conducted in November 2017.