Johannesburg, 3 June 2019 – GCR Ratings (“GCR”) has accorded final, public long-term credit ratings to the following Classes of Notes (the “New Notes”) issued by the South African Securitisation Programme (RF) Limited – Series 1 (“SASP 1” or the “Issuer”) on 17 May 2019:
||Stock code ERSA26;||R178,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERS3B6;||R16,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERS3C6;||R6,000,000;||AAA(ZA)(sf);||Stable outlook.|
Concurrently, GCR has affirmed the ratings of the existing Class A Notes listed below with a Stable outlook. The existing Class B Notes listed below have been upgraded from ‘A(ZA)(sf)’ to ‘AAA(ZA)(sf)’ with a Stable outlook. The existing Class C Notes listed below have been upgraded from ‘BBB(ZA)(sf)’ to ‘AAA(ZA)(sf)’ with a Stable outlook. The upgrades reflect the positive impact of the build-up of credit enhancement, the updates to the rating stresses under the Global Consumer ABS Rating Criteria, the amended cumulative default and recovery base case assumptions, as well as the amended transaction documents (which were amended to align with GCR’s updated Criteria).
|Stock code ERSA21;||R155,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERSA23;||R230,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERSA24;||R108,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERSA25;||R281,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERS3B4;||R99,000,000;||AAA(ZA)(sf);||Stable outlook;|
|Stock code ERS3C4;||R35,000,000;||AAA(ZA)(sf);||Stable outlook.|
The final public ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal by the Final Redemption Date of each Class of Notes respectively, while the ratings accorded to the Class B and Class C Notes relate to ultimate payment of interest and principal by the Final Redemption Date. The ratings exclude an assessment of the ability by the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
SUMMARY RATING RATIONALE
GCR has accorded the above final credit ratings to the SASP 1 Notes based on the following key factors:
SASP 1 is a revolving series and is the first of three series of the R5bn multi-seller segregated asset-backed note programme of rental and equipment lease financed assets originated by Sasfin. The pool of assets in SASP 1 is made up of equipment leases primarily for office equipment. The transaction benefits from an aggregate R189.4m that comprises the unrated Subordinated Loan and First Loss Loan, which are partially used to fund the Reserve Fund as well as to provide credit enhancement to the Notes.
Following the full redemption of the ERSA22, RS3B5 and ERS3C5 Notes on 17 May 2019, SASP 1 refinanced the Notes through the issuance of the ERSA26, RS3B6 and ERS3C6 Notes. Subsequently, the capital structure has not changed.
GCR modelled the transaction in a Pre-Enforcement Amortisation scenario as per the updated Global Consumer ABS Rating Criteria. The transaction was previously modelled in a Post-Enforcement scenario. In addition, the cumulative default and recovery base cases were amended to reflect the observed historical performance and to enhance the comparability of ratings assigned by GCR. The utilisation of excess spread to purchase additional assets by the Issuer, among other factors, has resulted in the build-up of credit enhancement in the structure.
For more information in respect of the transaction and GCR’s analysis, please refer to the SASP 1 New Issuance Report published in June 2019, as well as the SASP 1 New Ratings Report published in December 2015. GCR analysed the transaction by applying its Global Master Structured Finance Rating Criteria (Sep’18) and Global Consumer Asset-Backed Securitisation Rating Criteria (Sep’18); with reference to its updated cash flow model report and Sasfin Bank Limited Rating Report (May’18).
|NATIONAL SCALE RATINGS HISTORY|
|Structured Finance Analyst|
|Structured Finance Analyst|
|Sector Head: Structured Finance Ratings|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
- Global Master Structured Finance Rating Criteria (Sep’18);
- Global Consumer Asset-Backed Securitisation Rating Criteria (Sep’18);
- SASP Series 1 New Issuance Report (June’19);
- SASP Series 1 Surveillance Report (Mar’18) ; and
- SASP Series 1 New Issuance Report (Dec’15).
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings are 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 participated in the rating process via face-to-face management 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 Issuer.
The information received from the Arranger and other reliable third parties to accord the credit ratings included:
- Pool Cut for the Portfolio at April 2019;
- Static Cumulative default and recovery data up to quarter ending March 2019;
- Historic Prepayments up to February 2019;
- Senior Expenses information;
- Final signed Addendum to the Account Bank Agreement;
- Final signed Legal opinion;
- Draft Supplement to the Series Supplement;
- Final signed Addendum to the Series Servicer Agreement;
- Final signed Applicable Pricing Supplements for the New Notes, and
- SASP 1 Surveillance Reports up to March 2019.
The ratings above were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY
|Agency||An insurance sales office which is directed by an agent, manager, independent agent, or company manager.|
|Agent||One who solicits, negotiates or effects contracts of insurance on behalf of an insurer. An agent can be independent, being one that represents several companies, or a captive (tied) agent that sells insurance for only one company.|
|Amortisation||From a liability perspective, the paying off of debt in a series of instalments over a period of time. From an asset perspective, the spreading of capital expenses for intangible assets over a specific period of time (usually over the asset’s useful life).|
|Assets||A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.|
|Benefits||Financial reimbursement and other services provided to insureds by insurers under the terms of an insurance contract.|
|Capital||The sum of money that is invested to generate proceeds.|
|Cash||Funds that can be readily spent or used to meet current obligations.|
|Cash Flow||The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.|
|Claim||A request for payment of a loss, which may come under the terms of an insurance contract.|
|Conditions||Provisions inserted in an insurance contract that qualify or place limitations on the insurer’s promise to perform.|
|Contract||An agreement by which an insurer agrees, for a consideration, to provide benefits, reimburse losses or provide services for an insured. A ‘policy’ is the written statement of the terms of the contract.|
|Credit Rating Agency||An entity that provides credit rating services.|
|Debt||An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.|
|Interest||Money paid for the use of money.|
|Interest Rate||The charge or the return on an asset or debt expressed as a percentage of the price or size of the asset or debt. It is usually expressed on an annual basis.|
|Liquidity||The speed at which assets can be converted to cash. The ability of an insurer to convert its assets into cash to pay claims if necessary. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.|
|Liquidity Risk||The risk that a company may not be able to meet its financial obligations or other operational cash requirements due to an inability to timeously realise cash from its assets. Regarding securities, the risk that a financial instrument cannot be traded at its market price due to the size, structure or efficiency of the market.|
|Loss||The happening of the event for which insurance pays.|
|National Scale Rating||The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country.|
|Pool||An organisation of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed-upon amounts.|
|Portfolio||All of the insurer’s in-force policies and outstanding losses, with respect to described segments of its business.|
|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).|
|Rating Watch||Indicates that a rating is under review for possible change in the short term and the movement may be either positive or negative.|
|Reserve||(1) An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.|
|Risk||The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.|
|Securities||Various instruments used in the capital market to raise funds.|
|Short Term||Current; ordinarily less than one year.|
|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.|
|Upgrade||The assignment of a higher credit rating to an insurer by a credit rating agency. Opposite of downgrade.|
For a detailed glossary of terms, please click here