Johannesburg, 2 November 2016 — Global Credit Ratings (‘GCR’) has accorded indicative, public long term credit ratings and rating outlooks to the following Series 2 Notes (“Series 2”) to be issued by the South African Securitisation Programme (RF) Limited (“SASP” or “SASP Series 2”) on 21 November 2016:
ZAR 280m, Class A2, stock code LRFA2, interest at 3M Jibar + [*]%, due 20 November 2019: .…………..……‘AA(ZA)(sf)’, Outlook Stable.
ZAR 52.5m, Class B2, stock code LRFB2, interest at 3M Jibar + [*]%, due 20 November 2019: ..………………. ‘A(ZA)(sf)’, Outlook Stable.
ZAR 17.5m, Class C2, stock code LRFC2, interest at 3M Jibar + [*]%, due 20 November 2019: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
SASP Series 2 is a public securitisation of rental and lease financed assets, originated by Sasfin, Sunlyn and other entities approved by Sasfin. 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 A2 Notes, Class B2 Notes and Class C2 Notes (collectively the “Series 2 Notes”) will be issued under SASP Series 2 (the “Transaction”). SASP has issued notes under other series, SASP Series 1 and SASP Series 3, whose assets (the “Series 1 Assets and Series 3 Assets”), respectively, and liabilities are completely segregated from the assets of SASP Series 2 (the “Series 2 Assets”). The notes issued under SASP Series 1 and SASP Series 3 are also rated by GCR.
The proceeds of the note issuance will be used to redeem the existing Class A1, Class B1 and Class C1 Notes (the “Existing Notes”). The Issuer will also draw R35.0m in the form of a Subordinated Loan. Sasfin will maintain an Arrears Reserve amounting to the sum of the NPV of the delinquent leases at any point.
GCR reviewed the performance of leases originated by SASP 2 and Sasfin (leases meeting the eligibility criteria for SASP 2) for the period from Q3 2009 to Q3 2016 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 2 Pre-Funding Report to be published on 2 November 2016.
The indicative, public credit ratings accorded to the ‘Class A2 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.
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Sector Head: Structured Finance Ratings
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’16;
Global Consumer Asset Backed Securitisation Rating Criteria – Apr ’16;
GCR’s SASP 2 New Issuance Report – Nov ’13; and
GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – Apr ’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.
|Asset||An item with economic value that an entity owns or controls.|
|Credit||A contractual agreement in which a borrower receives something of value now, and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company|
|Creditor||A credit provider that is owed debt obligations by a debtor.|
|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.|
|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.|
|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.|
|Recourse||A source of help in a difficult situation.|
|Rent||Payment from a lessee to the lessor for the temporary use of an asset.|
|Secured Creditor||A creditor that has specific assets pledged as collateral that will receive the proceeds in the event of default.|
|Securitisation||Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.|
|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.|
|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.|
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings were 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 the portfolio performance data relating to the underlying equipment lease portfolio covering the period September 2009 – August 2016; an overview of the available lease portfolio that will be acquired by the Issuer at Transaction Closing as per 31 August 2016; the Issuer’s audited annual financial statements for the year ending 30 June 2016; draft Series 2 Supplement. GCR received the draft of the transaction legal opinion prepared by South African transaction legal counsel, Edward Nathan Sonnenbergs.
GCR accords indicative, public ratings to the Notes to be issued by the South African Securitisation Programme (RF) Limited – Series 2