Announcements

GCR affirms Quince Capital (Proprietary) Limited’s rating of A+(ZA); Outlook Stable.

Johannesburg, 17 September 2014 — Global Credit Ratings (“GCR”) has affirmed the national scale ratings assigned to Quince Capital (Proprietary) Limited of A+(ZA) and A1(ZA) in the long term and short term respectively; with the outlook accorded as Stable. Furthermore, GCR has affirmed the international scale rating assigned to Quince Capital (Proprietary) Limited of BBB-; with the outlook accorded as Negative.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) to Quince Capital (Proprietary) Limited (“Quince Capital”, “the company”) based on the following key criteria:

Strong business model: the ratings reflect the company’s intrinsic credit strength, and are based on its established rental discounting franchise, risk management practices, monoline but profitable business model, acceptable risk based capital levels, and the support from its group parent, Reunert Limited.

Group positioning: the company is viewed as strategically important to the group as it adds diversity and facilitates business flow (by providing the client with a cradle to grave solution, and limiting revenue leakage from the group). To that end, the group’s commitment is evident in every crucial business block. Therefore, the company’s ratings benefit from a one-notch uplift for extraordinary parental support.

Low credit risk: while the company is exposed to both the (client facing) franchise or dealer and the underlying customer or end-user, the combined credit quality of these are considered strong, shown by the low level of problem loans and a high recovery rate. This is further evidenced by modest credit loss rates over the review period.

Improved funding profile: the company has taken notable effort to reduce reliance on its parent and deepen its funding pool, and in F14 secured external long and short-term funding, which has improved liquidity and interest rate profile matching, thereby reducing both funding and interest rate risks. The additional external funding did not increase the company’s funding costs. The revised funding plan has also afforded the company an unreserved buffer for future growth and/or to offset the allied pressures of tighter cash collections or seasonality.

Additional progress in the company’s market positioning, trading performance, financial profile and portfolio collections track record (continuing/arrears asset book) would be positively considered from a ratings perspective, although the likely or perceived impact would not automatically transform into a rating action/move. A ratings downgrade may be triggered by a materially weakening operating environment, combined with credit losses significantly above expectations. Higher than anticipated liquidity gaps, less stringent credit criteria, a weaker franchise or geographical diversification, and a downgrade of the group’s rating/s, would weigh on the ratings.

NATIONAL SCALE RATINGS HISTORY INTERNATIONAL SCALE RATINGS HISTORY
Initial rating (Aug/2013) Initial rating (Aug/2013)
Long term: A+(ZA); Short term: A1(ZA) Long term: BBB-
Outlook: Stable Outlook: Stable
Last rating (Jul/2014) Last rating (Jul/2014)
Long term: A+(ZA); Short term: A1(ZA) Long term: BBB-
Outlook: Stable Outlook: Negative

ANALYTICAL CONTACTS

Primary Analyst
Omega Collocott
Head: Financial Institution Ratings
(011) 784-1771
omegac@globalratings.net

Committee Chairperson
Eyal Shevel
Head: Corporate Ratings
(011) 784-1771
shevel@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Banks and Other Financial Institutions, April 2014
Criteria for Rating Finance and Leasing Companies, April 2014

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. 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.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

Quince Capital (Proprietary) Limited 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 credit rating/s has been disclosed to Quince Capital (Proprietary) Limited with no contestation of the rating.

The information received from Quince Capital (Proprietary) Limited and other reliable third parties to accord the credit rating included the 30 September 2013 audited annual financial statements (plus three years of comparative numbers), 30 September 2014 and 2015 budgeted financial statements, 1 October 2013 to 30 June 2014 management accounts, corporate governance and enterprise risk framework, and a breakdown of facilities available and related counterparties.

The ratings were solicited by, or on behalf of, Quince Capital (Proprietary) Limited, and therefore, GCR has been compensated for the provision of the ratings.

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