Johannesburg, 29 November 2017 — Global Credit Ratings (“GCR”) has accorded indicative, public long-term credit ratings and rating outlooks to the following Series 3 Notes to be issued by the South African Securitisation Programme (RF) Limited (“SASP” or “SASP Series 3”):
ZAR240m, Class A3, stock code SLRA3, interest at 3M JIBAR + 1.73%*, due 15 November 2020: .…………….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR242m, Class A4, stock code SLRA4, interest at 3M JIBAR + 1.98%*, due 15 November 2022: .…………….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR 34m, Class B3, stock code SLRB3, interest at 3M JIBAR + 2.13%*, due 15 November 2020: ..…..………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 34m, Class B4, stock code SLRB4, interest at 3M JIBAR + 2.23%*, due 15 November 2022: ..…..………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 25m, Class C3, stock code SLRC3, interest at 3M JIBAR + 2.94%*, due 15 November 2020: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
ZAR 25m, Class C4, stock code SLRC4, interest at 3M JIBAR + 3.15%*, due 15 November 2022: .……….…… ‘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 August 2019: .…………….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR276m, Class A2, stock code SLRA2, interest at 3M JIBAR + 1.98%, due 15 August 2021: .…………….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR 30m, Class B1, stock code SLRB1, interest at 3M JIBAR + 2.13%, due 15 August 2019: ..……………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 45m, Class B2, stock code SLRB2, interest at 3M JIBAR + 2.23%, due 15 August 2021: ..……………… ‘A(ZA)(sf)’, Outlook Stable.
ZAR 35m, Class C1, stock code SLRC1, interest at 3M JIBAR + 2.94%, due 15 August 2019: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
ZAR 20m, Class C2, stock code SLRC2, interest at 3M JIBAR + 3.15%, due 15 August 2021: .……….…… ‘BBB(ZA)(sf)’, Outlook Stable.
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 will be used to fund the SASP Series 3 portfolio of equipment lease receivables and the associated equipment. The Issuer will also draw R107.2m in the form of a Subordinated Loan. A NPL/Legal Reserve will be present on the Tap issuance date of SASP 3. The NPL/Legal Reserve has reduced to an amount of R26.0m and will be funded by a dedicated Subordinated Loan (the “NPL Subordinated Loan”). Further to the aforementioned reserve, the Transaction will benefit 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.
GCR reviewed the performance of leases originated by Fintech and Sasfin for the period from June 2002 to September 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 Tap-Issuance Report to be published on 30 November 2017.
The indicative and 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. The assignment of final ratings to the new Notes will be subject to receipt by GCR of the final signed Transaction Documents and the final signed legal and tax opinions.
# Indicative ratings
Senior Structured Finance Analyst
+27 11 784 1771
Structured Finance Analyst
+27 11 784 1771
Sector Head: Structured Finance Ratings
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria, updated Feb ’17;
Global Consumer Asset Backed Securitisation Rating Criteria, updated May ’17; and
GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – Apr ’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.
|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 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:
- Portfolio performance data relating to the underlying equipment lease portfolio covering the period June 2002 – September 2017;
- An overview of the available lease portfolio that will be acquired by the Issuer at Transaction Closing as per 20 November 2017;
- An audit report relating to the securitised portfolio;
- The Issuer’s audited annual financial statements for the year ending 30 June 2017;
- Draft Transaction documents prepared by South African transaction legal counsel; and
- Draft tax opinion for the Tap Issuance.
GCR accords indicative, public ratings to the Senior Notes to be issued by SASP Series 3