Announcements

GCR affirms final, public ratings for the Notes issued by the South African Securitisation Programme

Johannesburg, 14 June 2018 — Global Credit Ratings (“GCR”) has affirmed the final, public long-term credit ratings and rating outlooks accorded to the following Series 3 Notes (“Series 3”) issued by the South African Securitisation Programme (RF) Limited (“SASP” or “SASP Series 3”):

R259.0m, Class A1, stock code SLRA1, interest at 3M JIBAR + 1.73%, due 15 August 2019 :…………………. ‘AAA(ZA)(sf)’, Outlook Stable.

R276.0m, Class A2, stock code SLRA2, interest at 3M JIBAR + 1.98%, due 15 August 2021:..………………… ‘AAA(ZA)(sf)’, Outlook Stable.

R357.0m, Class A3, stock code SLRA3, interest at 3M JIBAR + 1.50%, due 15 November 2020:………………‘AAA(ZA)(sf)’, Outlook Stable.

R125.0m, Class A4, stock code SLRA4, interest at 3M JIBAR + 1.75%, due 15 November 2020:………………‘AAA(ZA)(sf)’, Outlook Stable.

R30.0m, Class B1, stock code SLRB1, interest at 3M JIBAR + 2.13%, due 15 August 2019: ….…..……………..…‘A(ZA)(sf)’, Outlook Stable.

R45.0m, Class B2, stock code SLRB2, interest at 3M JIBAR + 2.23%, due 15 August 2021: …….….………….…….‘A(ZA)(sf)’, Outlook Stable.

R31.0m, Class B3, stock code SLRB3, interest at 3M JIBAR + 2.25%, due 15 November 2020:……….…….………‘A(ZA)(sf)’, Outlook Stable.

R37.0m, Class B4, stock code SLRB4, interest at 3M JIBAR + 2.30%, due 15 November 2020: ….…….………….‘A(ZA)(sf)’, Outlook Stable.

R35.0m, Class C1, stock code SLRC1, interest at 3M JIBAR + 2.94%, due 15 August 2019: ..………………….’BBB(ZA)(sf)’, Outlook Stable.

R20.0m, Class C2, stock code SLRC2, interest at 3M JIBAR + 3.15%, due 15 August 2021.….……….………….‘BBB(ZA)(sf)’, Outlook Stable.

R25.0m, Class C3, stock code SLRC3, interest at 3M JIBAR + 2.68%, due 15 November 2020: .…….…………‘BBB(ZA)(sf)’, Outlook Stable.

R25.0m, Class C4, stock code SLRC4, interest at 3M JIBAR + 2.90%, due 15 November 2020: .…….…………‘BBB(ZA)(sf)’, Outlook Stable.

RATING RATIONALE

SASP 3 (previously “Fintech Receivables 2” or “FR2”) is a public securitisation of rental and lease finance assets originated by Fintech Underwriting and leases to be originated by Sasfin Bank Limited (BBB+(za) rating affirmed by GCR in May 2018) through Sunlyn Rentals Proprietary Limited (“Sunlyn”) and other entities approved by Sasfin Bank Limited which include disclosed suppliers and super non-disclosed suppliers (“SNDs”). 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 aggregate of the FR2 non-performing loan (“FR2 NPLs”) deals amounted to R14.2m as at 30 April 2018 (compared to R20.0m in October 2017), these are sufficiently provided for by means of the NPL Reserve Fund, which is funded by a dedicated Subordinated Loan (the “NPL Subordinated Loan”).

The Subordinated Loan continues to be funded at the levels stipulated by GCR at the Tap issuance. Should this excess not be maintained, rating action may be taken by GCR. GCR further noted that the Reserve Fund, Arrears Reserve Fund and Over Collateralisation levels were adequately maintained.

GCR reviewed the performance of leases originated by SASP 3 for the period from 31 October 2017 to 30 April 2018. GCR noted that there was no breach in any Performance Tests and therefore no Amortisation Events during the review period. However, for April 2018 GCR noted an error in the percentage of the aggregate NPV of fixed rate Equipment Leases hedged, which was at 109.8% compared to the benchmark of between 95% – 105%. Sasfin indicated that this has been rectified and should reflect in the May 18 investor reports.

The net default percentage gradually increased from 0.9% in October 2017 to 1.8% in April 2018, albeit below the trigger of 2.63%. Sasfin attributed this to the challenging economic environment. GCR performed a servicer review of Sasfin in June 2018 at which no changes to systems/policies were communicated. However, in light of the challenging economic conditions, process and policies are being reviewed by Sasfin.

For more information, please read the South African Securitisation Programme (RF) Limited Series 3 Surveillance Report published on 14 June 2018.

The final, public credit ratings accorded to the ‘Class A 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 in a post-enforcement scenario. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.

RATINGS HISTORY

Security Class
Initial rating
Long term rating
Rating outlook
SLRA1
16 September 2016
AAA(ZA)(sf)
Stable
SLRA2
16 September 2016
AAA(ZA)(sf)
Stable
SLRB1
16 September 2016
A(ZA)(sf)
Stable
SLRB2
16 September 2016
A(ZA)(sf)
Stable
SLRC1
16 September 2016
BBB(ZA)(sf)
Stable
SLRC2
16 September 2016
BBB(ZA)(sf)
Stable
Security Class
Last rating
Long term rating
Rating outlook
SLRA1
13 December 2017
AAA(ZA)(sf)
Stable
SLRA2
13 December 2017
AAA(ZA)(sf)
Stable
SLRA3
13 December 2017
AAA(ZA)(sf)
Stable
SLRA4
13 December 2017
AAA(ZA)(sf)
Stable
SLRB1
13 December 2017
A(ZA)(sf)
Stable
SLRB2
13 December 2017
A(ZA)(sf)
Stable
SLRB3
13 December 2017
A(ZA)(sf)
Stable
SLRB4
13 December 2017
A(ZA)(sf)
Stable
SLRC1
13 December 2017
BBB(ZA)(sf)
Stable
SLRC2
13 December 2017
BBB(ZA)(sf)
Stable
SLRC3
13 December 2017
BBB(ZA)(sf)
Stable
SLRC4
13 December 2017
BBB(ZA)(sf)
Stable

.

ANALYTICAL CONTACTS

Primary Analyst
Mark Vrdoljak
Senior Structured Finance Analyst
+27 11 784 1771
markvrd@globalratings.net

Secondary Analyst
Tinashe Mujuru
Structured Finance Analyst
+27 11 784 1771
tinashem@globalratings.net

Committee Chairperson
Yohan Assous
Sector Head: Structured Finance Ratings
+27 11 784 1771.
yohan@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Structured Finance Rating Criteria, updated Feb ’17;

Global Consumer Asset Backed Securitisation Rating Criteria, updated May ’17;

South African Securitisation Programme (RF) Limited Series 3 New Issuance Report – Dec ’17;

South African Securitisation Programme (RF) Limited Series 3 Surveillance Report – Oct ’17;

South African Securitisation Programme (RF) Limited Series 3 Surveillance Report – Jun ’18; and

GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – May ’18.

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.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY

Account Bank A bank where the transaction account is held.
Advance A lending term, to transfer funds from the creditor to the debtor.
Ageing The age of an asset or obligation.
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.
Agreement A negotiated and usually legally enforceable understanding between two or more legally competent parties.
Amortisation From a liability perspective, the paying off of debt in a series of installments 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).
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.
Arrears General term for non-performing obligations, i.e. obligations that are overdue.
Arrears Reserve An accounting provision made in a reserve fund for arrears.
Asset An item with economic value that an entity owns or controls.
Bankruptcy Court proceedings at which an individual or a company is declared unable to pay its creditors. The liability of a bankrupt company typically exceeds its assets.
Bond A long term debt instrument issued by either: a company, institution or the government to raise funds.
Borrower The party indebted or the person making repayments for its borrowings.
Capital The sum of money that is used to generate proceeds.
Capital Markets The part of a financial system concerned with raising capital by dealing in shares, bonds, and other long-term debt securities.
Cash Flow A financial term for monetary changes in operations, investing and financing activities.
Collateral An asset pledged as security in event of default.
Conduit A commercial lending entity that is established to purchase assets to securitise.
Coupon Interest payment on a security.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
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
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 An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Credit Rating Agency An entity that provides credit rating services.
Credit Risk The probability or likelihood that a borrower or issuer will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred).
Creditor A credit provider that is owed debt obligations by a debtor.
Creditworthiness An assessment of a debtor’s ability to meet debt obligations.
Debt An obligation to repay a sum of money.
Debtor The party indebted or the person making repayments for its borrowings.
Deed A legal document that is signed and delivered, especially one regarding the ownership of property or legal rights.
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.
Enforcement To make sure people do what is required by a law or rule et cetera.
Excess Spread The net weighted average interest rate receivable on a pool of assets being greater than the weighted average interest rate payable for the debt securities.
Exposure Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on one source of funding.
Guarantee An undertaking for performance of another’s obligations in event of default.
Hedge A form of insurance against financial loss or other adverse circumstances.
Insurance Provides protection against a possible eventuality.
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.
Junior A security that has a lower repayment priority than senior securities.
Junior Tranche A security that has a lower repayment priority than senior securities.
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.
Lender A credit provider that is owed debt obligations by a debtor.
Lessee The party that enjoys temporary use of a corporeal thing.
Lessor The owner or agent that acts on behalf of the owner of property that grants the temporary use of a corporeal thing.
Liability All financial claims, debts or potential losses incurred by an individual or an organisation.
Liquidity The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity.
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.
Loan A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.
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.
Loss A tangible or intangible, financial or non-financial loss of economic value.
Market An assessment of the property value, with the value being compared to similar properties in the area.
Mortgage Loan A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.
Mortgage Pool A group of mortgages held as collateral for a mortgage-backed security. The securities issued represented shares in the pool. The mortgages in a particular pool may have similar maturities and yields, and are on a similar class of property.
Mortgagee A creditor under a mortgage agreement.
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.
Obligor The party indebted or the person making repayments for its borrowings.
Origination A process of creating assets.
Performing An obligation that performs according to its contractual obligations.
Pledge Constituted by an agreement between the pledgor, who undertakes to deliver the article, and the pledgee, and subsequent delivery of the property in question as security for debt. A pledge is only applicable to movable property.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Proceeds Funds from issuance of debt securities or sale of assets.
Property Movable or immovable asset.
Provision An amount set aside for expected losses to be incurred by a creditor.
Ranking A priority applied to obligations in order of seniority.
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).
Receivables General term for economic benefit derived from an asset.
Redemption The repurchase of a bond at maturity by the issuer.
Reference Rate A rate that is the basis of the calculation such as JIBAR.
Rent Payment from a lessee to the lessor for the temporary use of an asset.
Repack Rearrangement of securities with the intent to be more attractive for investment. Junior tranches (that have a higher degree of default risk) of a securitisation transactions that have been repackaged into separate debt securities (according to their degree of risk) that utilise credit-enhancement techniques to mitigate the risk. A CDO is created to distribute the prepayment risk amongst different classes of Notes.
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.
Reserve Fund A funded account available for use by a Special Purpose Vehicle for one or more specified purposes. A reserve fund is often used as a form of credit enhancement. Typically accumulated over time, through excess cash flows.
Seasoning The age of an asset, the time period passed since origination.
Securities Various instruments used in the capital market to raise funds.
Securitisation Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.
Securitisation Vehicle An entity that is created to fulfill specific objectives. Normally insolvency remote and created to isolate financial risk.
Security An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.
Senior A security that has a higher repayment priority than junior securities.
Servicer A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.
Servicing The calculation of interest and repayments, collection of repayments, advancing of loans, foreclose procedures, maintaining records and seeing that the proceeds of each loan are passed on to the respective party.
Settlement Full repayment of an obligation.
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.
Special Purpose Vehicle An entity that is created to fulfill specific objectives. Normally insolvency remote and created to isolate financial risk.
Spread The interest rate that is paid in addition to the reference rate for debt securities.
Standard Deviation An indication of risk amongst the dispersion of values. Higher value indicates greater risk.
Stock Code A unique code allocated to a publicly listed security.
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.
Subordinated Loan A loan typically given by the Issuer to the securitisation vehicle that is more junior than a junior tranche.
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.
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.
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.
Trust A third party that acts in the best interest of another party, according to the trust deed, usually the investors. Owner of a securitisation vehicle that acts in the best interest of the Noteholders.
Trust Deed A deed of conveyance creating and setting out the conditions of a trust.
Trustee A third party that acts in the best interest of another party, according to the trust deed, usually the investors. Owner of a securitisation vehicle that acts in the best interest of the Noteholders.
Ultimate Payment A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.
Weighted The weight that a single obligation has in relation to the aggregated pool of obligations. For example, a single mortgage principal balance divided by the aggregated mortgage pool principal balance.
Weighted Average An average resulting from the multiplication of each component by a factor reflecting its importance or, relative size to a pool of assets or liabilities.
Yield Percentage return on an investment or security, usually calculated at an annual rate.
   

For a detailed glossary of terms please click here.

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 instruments being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instruments; 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 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 Issuer’s audited annual financial statements for the year ending June 2017; portfolio performance data relating to the underlying equipment lease portfolio covering the period June 2002 – August 2017; an overview of the Issuer’s lease portfolio at 31 August 2017 and monthly management reporting packs up to 30 April 2018.

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

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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