Johannesburg, 6 October 2017 — 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 17 November 2025: .…………………. ‘AAA(ZA)(sf)’, Outlook Stable.
R276.0m, Class A2, stock code SLRA2, interest at 3M JIBAR + 1.98%, due 17 November 2025: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R30.0m, Class B1, stock code SLRB1, interest at 3M JIBAR + 2.13%, due 17 November 2025: .……………..…………‘A(ZA)(sf)’, Outlook Stable.
R45.0m, Class B2, stock code SLRB2, interest at 3M JIBAR + 2.23%, due 17 November 2025: .………….…….………‘A(ZA)(sf)’, Outlook Stable.
R35.0m, Class C1, stock code SLRC1, interest at 3M JIBAR + 2.94%, due 17 November 2025: ..…………………..‘BBB(ZA)(sf)’, Outlook Stable.
R20.0m, Class C2, stock code SLRC2, interest at 3M JIBAR + 3.15%, due 17 November 2025: .……….…………..‘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 FR2 through Fintech Underwriting and leases to be originated by Sasfin through Sunlyn Rentals Proprietary Limited (“Sunlyn”) and other entities approved by Sasfin 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 proceeds of the note issuance were used to fund the SASP 3 portfolio of equipment lease receivables and the associated equipment (the “Series 3 Assets”). The aggregate of the FR2 non-performing loan (“FR2 NPLs”) deals amounted to R20.6m as at 31 August 2017 and these are sufficiently provided for by means of the NPL Reserve Fund, which is funded by a dedicated Subordinated Loan (the “NPL Subordinated Loan”).
GCR reviewed the performance of leases originated by SASP 3 for the period from 1 February 2017 to 31 August 2017. GCR noted that there was no breach in any Performance Tests and therefore no Amortisation Events during the review period. However, GCR noted that although there were no net defaults reported prior to January 2017, the net default percentage gradually increased to 0.75%, albeit significantly below the trigger of 2.63%. This is partly attributed to the portfolio seasoning and the default recognition policy, whereby defaults are recognized after 120 days.
GCR further noted that the Reserve Fund, Arrears Reserve Fund and Over Collateralisation levels were adequately maintained. For more information, please read the South African Securitisation Programme (RF) Limited Series 3 Surveillance Report published on 6 October 2017.
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
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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 – Sep ’16;
South African Securitisation Programme (RF) Limited Series 3 Surveillance Report – Mar ’17; and
GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – May ’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.
| 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). |
| 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. |
| Collateral | An asset pledged as security in event of default. |
| Creditor | A credit provider that is owed debt obligations by a debtor. |
| 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. |
| 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. |
| 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. |
| Performing | An obligation that performs according to its contractual obligations. |
| Principal | The total amount borrowed or lent, e.g. the face value of a bond, excluding interest. |
| 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. |
| Recourse | A source of help in a difficult situation. |
| Rent | Payment from a lessee to the lessor for the temporary use of an asset. |
| 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. |
| Secured Creditor | A creditor that has specific assets pledged as collateral that will receive the proceeds in the event of default. |
| 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. |
| 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. |
| 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. |
| Stock Code | A unique code allocated to a publicly listed security. |
| 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. |
| 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. |
| Ultimate Payment | A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries. |
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 31 August 2017.
The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.