Announcements

GCR accords indicative, public rating to the Senior Secured Notes to be issued by IEMAS.

Johannesburg, 28 July 2014 — Global Credit Rating Co. (‘GCR’) has accorded an indicative, public long term rating of ‘AA-(ZA)’ and a ‘Stable’ Rating Outlook to the senior secured notes (the ‘Senior Secured Notes’) to be issued by IEMAS Financial Services (Co-operative) Limited (‘IEMAS’) in August 2014 (the ‘Transaction’) under its R2bn DMTN Program (the ‘Programme’).

• ZAR 500,000,0001 Senior Secured Notes, 3M Jibar + margin, varying targeted maturities.
1Targetted Issuance amount.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating to IEMAS’s Senior Secured Notes based on the following key criteria:

IEMAS is a ‘co-operative’ that provides financial services to members across South Africa. IEMAS was established in 1937, with roots in the former state owned steel company, Iscor. Over the 77 years of its history, IEMAS has grown from providing modest staff loan facilities into a diversified financial services provider. IEMAS currently provides financial advisory and short term insurance brokerage services to its members, in addition to secured and unsecured loan products under its ‘loan product business’, which is the core of the co-operative’s business.

The Transaction was analysed by estimating the recovery prospects arising from enforcement by IEMAS Security SPV (RF) (Pty) Limited of the underlying collateral (loans advanced to co-operative members) that serves as security for the benefit of the Senior Secured Noteholders and Bank Facility providers. The rating of the Senior Secured Notes was derived by applying a notching up approach, starting from the long term senior unsecured corporate credit rating of the Issuer. Based on the fundamentals and prospects of IEMAS, GCR accorded IEMAS, national scale Credit Ratings of ‘A-(ZA)/A2(ZA)’ on the long and short term respectively. With regards to the Senior Secured Notes, a rating uplift of 3 national scale notches was deemed appropriate for these particular Senior Secured Notes, given the ‘Superior Recovery Prospects’ of the Senior Secured Notes, equating to a ‘AA-(ZA)’ rating on the Transaction. The indicative, public rating will be finalised up receipt of all signed Transaction documentation.

For more information on the Transaction and specific details of the Senior Secured Notes, please refer to the Secured Bond Pre-Funding Report entitled “IEMAS Financial Services (Co-operative) Limited Senior Secured Notes”, to be published in July 2014. The Pre-Funding Report will be available to subscribers of GCR’s structured finance subscription service. GCR analysed the Transaction by applying its Global Structurally Enhanced Corporate Bonds Rating Criteria (October 2013); its Global Master Criteria for Rating Banks and other Financial Institutions (April 2014); and its Global Summary Criteria for Rating Finance and Leasing Companies (April 2014); with reference to the IEMAS Financial Institutions Report (April 2014).

NATIONAL SCALE RATINGS HISTORY

Initial rating (July/2014)
Senior Secured Notes: AA-(ZA); Outlook: Stable

Last rating (July/2014)
Senior Secured Notes: AA-(ZA); Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Mark Vrdoljak
Analyst
(011) 784-1771
Markvrd@globalratings.net

Committee Chairperson
Emma-Jane Fulcher
Sector Head: Structured Finance Ratings
(011) 784-1771
Fulcher@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structurally Enhanced Corporate Bonds Rating Criteria (October 2013);
Global Master Criteria for Rating Banks and other Financial Institutions (April 2014);
Global Summary Criteria for Rating Finance and Leasing Companies (April 2014);
• IEMAS Financial Institutions Report (April 2014).

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 ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating 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 info received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating.

The information received from the Issuer and other reliable third parties to accord the credit ratings included the draft security agreements; draft programme memorandum; draft applicable pricing supplement; draft legal opinion; the applicable security pool performance specifics for the period ended 31 May 2014; and the Issuer’s Audited Financial Statements for the year ended 31 August 2013.

The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS PRESS RELEASE PER GCR’S STRUCTURED FINANCE GLOSSARY

Applicable Pricing Supplement

A transaction document that describes the particulars of notes issued.

Corporate Credit Rating

A credit rating accorded to a corporate entity.

Credit Rating

A rating accorded to the performance of either ultimate or timely payment of obligations.

Credit Rating Agency

A party that provides an opinion on the credit quality of assets, debt securities and companies.

Credit Risk

The probability or likelihood that a borrower will not meet it’s debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred).

JIBAR

Johannesburg Interbank Agreed Rate. A reference rate.

Legal Opinion

An opinion regarding the validity and enforceable of a transaction’s legal documents.

Lien

A right of retention of someone else’s property due to expensed money or labour on property acquires a lien until payment is made.

Liquidity Risk

The risk that a financial instrument cannot be traded on it’s market price due to the size of the market.

Long Term Rating

A credit rating based on the opinion of the ability to repay long term (more than a year) obligations.

Property

Movable or immovable asset.

Rating Outlook

A Rating Outlook indicates the potential direction of a rating over the medium term, typically a one to two years period. 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).

Reference Rate

A rate that is the basis of the calculation such as JIBAR.

Structured Finance

A method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk.

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