Announcements Rating Alerts Structured Finance

GCR affirms A1+(ZA)(sf) rating assigned to the Notes issued by iMpumelelo CP Note Programme 1 (RF) Ltd

Rating Action

Johannesburg, 26 February 2020 – GCR Ratings (“GCR”) has affirmed the national scale short-term credit rating of ‘A1+(ZA)(sf)’ assigned to the Asset Backed Commercial Paper (“ABCP” or the “Notes”) issued by iMpumelelo CP Note Programme 1 (RF) Ltd (“iMpumelelo” or the “Issuer”) from time to time under the Issuer’s R10bn hybrid Serialised Note Programme (the “Programme”).

Security class Rating class Rating scale Rating Programme Amount Next Review Date
ABCP – Series 1 Issue Short Term National A1+(ZA)(sf) R10bn Feb 2021

The Short-Term rating assigned to the Notes relate to the Short-Term rating assigned to the guarantor of the Notes, being Absa Bank Ltd.

The rating accorded to the abovementioned Notes relates to timely payment of interest and timely payment of principal. The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties. The rating accorded to the Series 1 Notes excludes the issuance of notes with a maturity of greater than one year.

The iMpumelelo Programme is a hybrid Serialised Note Programme that is fully supported by Absa Bank Ltd (the “Guarantor”). The Issuer may issue listed and unlisted Notes which will not be subject to a minimum or maximum maturity. The Programme is registered on the Johannesburg Stock Exchange.

Rating Rationale

GCR’s rating methodology looks through to the Absa rating in order to accord a short-term rating to the Series 1 Notes, given the presence of the Absa guarantee. GCR assigned a Long-Term and Short-Term national scale rating of ‘AA(ZA)’ and ‘A1+(ZA)’ with a Stable Outlook to Absa Bank Ltd which was reviewed in August 2019.

The guarantee is for the due, punctual and full payment and performance of all the Noteholders Guaranteed Obligations as well as the Issuer Guaranteed Obligations, being senior costs and expenses under the transaction documents. The Issuer has the option to request the guarantor to acquire an unremedied Defaulted Asset. The guarantee is an irrevocable and unconditional Absa Guarantee that covers defaults (including defaults on the assets) and any liquidity shortfalls that may be incurred by the Issuer due to timing mismatches between the maturity of the assets and that of the Notes. There is, however, no requirement for any additional liquidity support or credit enhancement to be maintained by the Issuer in order to support the rating.

GCR conducted an operational review on 23 October 2019 on Absa Bank Ltd (“Absa”) for the functions they perform for the Issuer. There have been no significant changes to the operations of Absa in this transaction.

Surveillance and Monitoring

GCR continuously monitors iMpumelelo and publishes the Monitoring Dashboards on its website.

Analytical Contacts

Primary Analyst Corné Els Senior Structured Finance & Securitisation Analyst
Johannesburg, ZA CorneE@GCRratings.com +27 11 784 1771
Secondary Analyst Gary Nyoni Structured Finance Analyst & Securitisation Analyst
Johannesburg, ZA GaryN@GCRratings.com +27 11 784 1771
Committee Chair Yohan Assous Sector head: Structured Finance Ratings
Johannesburg, ZA Yohan@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for Rating Structured Finance Transactions, September 2018
Criteria for Rating Asset Backed Commercial Paper, November 2018
iMpumelelo CP Note Programme 1 (RF) Ltd Surveillance Report, February 2019

Ratings History

iMpumelelo CP Note Programme 1 (RF) Ltd

Security class Review Rating class Rating Outlook Date
ABCP – Series 1 Initial Issue Short-Term A1+(ZA)(sf) n.a Mar 2016
Last Issue Short-Term A1+(ZA)(sf) n.a Feb 2019

Glossary of Terms/Acronyms

Affirmation See GCR Rating Scales, Symbols and Definitions.
Agency An insurance sales office which is directed by an agent, manager, independent agent, or company manager.
Agent An agreement where one party (agent) concludes a juristic act on behalf of the other (principal). The agent undertakes to perform a task or mandate on behalf of the principal.
Arranger Usually an Investment bank that advises and constructs a transaction and acts as a conduit between the transaction parties: Client, Issuer, Credit Rating Agency, Investors, Legal Counsel and Servicers.
Asset A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.
Assets A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.
Commercial Paper Commercial paper is a negotiable instrument with a maturity of less than one year.
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 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.
Credit Rating Agency An entity that provides credit rating services.
Credit Risk The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and interest when due.
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.
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.
Guarantee An undertaking in writing by one person (the guarantor) given to another, usually a bank (the creditor) to be answerable for the debt of a third person (the debtor) to the creditor, upon default of the debtor.
Guarantor A party that gives the guarantee.
Hybrid A form of security that has characteristics of various types of transaction or product.
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.
Interest Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan.
Irrevocable Not able to be changed, reversed, recovered and final.
Issuer The party indebted or the person making repayments for its borrowings.
Liability All financial claims, debts or potential losses incurred by an individual or an organisation.
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.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. 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.
Loss 1. A tangible or intangible, financial or non-financial loss of economic value. 2. The happening of the event for which insurance pays (insurance).
Market An assessment of the property value, with the value being compared to similar properties in the area.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
National Scale Rating National scale ratings measure creditworthiness relative to issuers and issues within one country.
Noteholder Investor of capital market securities.
Obligation The title given to the legal relationship that exists between parties to an agreement when they acquire personal rights against each other for entitlement to perform.
Option An option gives the buyer or holder the right, but not the obligation, to buy or sell an underlying financial asset at a pre-determined price.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Provision The amount set aside or deducted from operating income to cover expected or identified loan losses.
Rating Outlook See GCR Rating Scales, Symbols and Definitions.
Repayment Payment made to honour obligations in regards to a credit agreement in the following credited order: 3.) Satisfy the due or unpaid interest charges; 4.) Satisfy the due or unpaid fees or charges; and 5.) To reduce the amount of the principal debt.
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.
Securitisation A process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.
Security One of various instruments used in the capital market to raise funds.
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.
Short Term Current; ordinarily less than one year.
Stock Exchange A market with a trading-floor or a screen-based system where members buy and sell securities.
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.
Surveillance Process of monitoring a transaction according to triggers, covenants and key performance indicators.
Timely Payment The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.
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.
Unconditional Not subject to any conditions.

Salient Points 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 credit ratings have been disclosed to the Arranger. 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.

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 information received from the Arranger and other reliable third parties to accord the credit ratings included:

  • Investor reports up to January 2020.
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