Johannesburg, 8 June 2020 – GCR Ratings (“GCR”) has reviewed the international scale long term ratings assigned to the securities issued by the Primary Investment Vehicles (“PIVs”) trading as Global Equity Investments (“GEI”) and affirmed linked credits GEI 1, GEI 5, GEI 6, GEI 7, GEI 10, GEI 11, GEI 12 and GEI 14 Ltd, while maintaining their respective Outlooks. The ratings of the securities issued by GEI 13 Ltd have been affirmed while the Outlook has been revised to Negative from Stable.
At the same time, GCR has affirmed and withdrawn the ratings of the securities issued by GEI 2, GEI 3, GEI 4 and GEI 8 Ltd for commercial reasons.
The rating actions follow the annual review of the ratings and reflects the lower of either the ‘BBB+(sf)‘ rating cap introduced at the June 2019 review or the movements in the ratings of the underlying linked credits .
The abovementioned international scale ratings relate to timely payment of dividends and principal. The ratings exclude an assessment of the ability of the Issuers to pay either any early repayment or default interest rate penalties.
The Issuers are established PIVs which may issue rand-denominated redeemable shares to a specific institutional investor in South Africa on a private basis. The proceeds from the subscription in the PIV shares are ultimately invested in rated credit assets, such that each PIV has an underlying exposure to a single credit counterparty.
In assessing the transaction in June 2019 under GCR’s Criteria for Rating Structured Finance Transactions, GCR noted the risk introduced to the transaction by the Custodian Account Bank and the Hedge Provider due to insufficient replacement triggers and the absence of remedial language in the event that these counterparties fail to perform their duties. GCR capped the ratings to the lower of either Standard Chartered Bank, Singapore branch (the Custodian Account Bank through which dividends are paid), or Investec Bank plc (the Hedge Provider).
Investec Bank plc is rated ‘BBB+’ with a Stable Outlook by GCR. Standard Chartered Bank, Singapore branch is rated ‘A1’ by Moody’s Investors Service (“MIS”) with a Stable Outlook. The rating cap has been maintained at the lower ‘BBB+(sf)’ rating assigned to Investec Bank plc.
Subsequently, the ratings assigned to GEI 1, GEI 7, GEI 11 and GEI 14 have been affirmed with their respective Outlooks maintained. The GEI 2 rating has been affirmed and withdrawn for commercial reasons. GCR noted no rating movements related to the underlying exposures of the cells at the time of the review.
Underlying Credit Rating Movements
In May 2020, Fitch Ratings affirmed its ‘AA-‘ rating assigned to HSBC Bank Plc, with a Negative Outlook. In May 2020 S&P Global Ratings downgraded its ratings assigned to HSBC Bank Plc to ‘A+’ from ‘AA-‘, with a Stable outlook. GCR has affirmed the GEI 3 rating of ‘BBB+(sf)’ with a Stable Outlook, which reflects the rating cap and have subsequently withdrawn the rating for commercial reasons.
In April 2020, S&P Global Ratings affirmed its rating assigned to Goldman Sachs Group Inc of ‘BBB+’ with a Stable Outlook. GCR has affirmed the GEI 4 rating of ‘BBB+(sf)’ with a Stable Outlook, reflecting the rating cap. While, subsequently withdrawing the rating for commercial reasons.
In May 2020, Fitch Ratings affirmed its ‘AA-‘ rating assigned to UBS AG/ Stamford CT, with a Negative Outlook. In May 2020 S&P affirmed its ‘A+’ rating assigned to UBS AG/ Stamford CT, with a Stable Outlook. GCR has affirmed the GEI 5 rating of ‘BBB+(sf)’ with a Stable Outlook, which reflects the rating cap.
In May 2020, Fitch Ratings affirmed its ‘A+‘ rating assigned to Scottish Widows Limited, with a Negative Outlook. In May 2020 S&P revised the Outlook on its rating assigned to Scottish Widows Limited to Negative from Stable. GCR has affirmed the GEI 6 rating of ‘BBB+(sf)’ with a Stable Outlook, which reflects the rating cap.
In May 2020, S&P affirmed its rating assigned to Sasol International Plc of ‘BB’ with a Negative Outlook. GCR has affirmed the GEI 8 rating of ‘BB(sf)’ with a Negative Outlook, which reflects the lower of the two ratings assigned to Sasol Financing International Plc, and simultaneously withdrawn the rating for commercial reasons.
In May 2020, Fitch Ratings affirmed its rating of ‘A+’ assigned to Barclays Bank Plc while maintaining the Rating Watch Negative outlook. GCR has affirmed the GEI 10 rating of ‘BBB+(sf)’ with a Stable Outlook, which reflects the rating cap.
In May 2020, S&P revised the Outlook on its rating assigned to Raiffeisen Bank International to Negative from Stable. GCR has affirmed the GEI 12 rating of ‘BBB+(sf)’ with a Stable Outlook, which reflects the rating cap.
In May 2020, Fitch Ratings downgraded its rating assigned to UniCredit SpA to ‘BBB-‘ from ‘BBB’ with Stable outlook. At the same time, in April 2020, S&P revised the Outlook on its rating of ‘BBB‘ assigned to UniCredit SpA to Negative from Stable. GCR has affirmed the rating assigned to GEI 13 of ‘BBB+(sf)’ while revising the Outlook to Negative, which reflects the median rating assigned to UniCredit SpA.
Surveillance and Monitoring
GCR continuously monitors the rating movements of the underlying linked credit of the PIVs and has published the latest Monitoring Dashboard on its website.
|Primary Analyst||Gary Nyoni||Structured Finance Analyst|
|Johannesburg, ZA||GaryN@GCRratings.com||+27 11 784 1771|
|Secondary Analyst||Siyuan Lu||Structured Finance Analyst|
|Johannesburg, ZA||Siyuanl@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 Credit Linked Notes and Repackaging Vehicles, November 2018|
|Global Equity Investments 1-14 Limited Surveillance Report, June 2019|
|Issuer||Underlying Linked Credit||Rating||Outlook||Initial Rating|
|GEI 1||Investec Bank plc||BBB+(sf)||Stable||Nov. 2016|
|GEI 2||Emirates NBD PJSC||A-(sf)||Stable||Nov. 2016|
|GEI 3||HSBC Bank plc||AA-(sf)||Stable||Nov. 2016|
|GEI 4||Goldman Sachs Group Inc||A-(sf)||Stable||Nov. 2016|
|GEI 5||UBS AG/Stamford CT||A+(sf)||Stable||Nov. 2016|
|GEI 6||Scottish Widows Limited||A(sf)||Positive||Nov. 2016|
|GEI 7||Fidelity International Ltd||BBB+(sf)||Stable||Nov. 2016|
|GEI 8||Sasol Financing International plc||BBB(sf)||Negative||Nov. 2016|
|GEI 10||Barclays Bank plc||A(sf)||Negative||Nov. 2016|
|GEI 11||MTN Mauritius Investments||BB+(sf)||Negative||Sep. 2017|
|GEI 12||Raiffeisen Bank International||BBB+(sf)||Stable||Sep. 2017|
|GEI 13||UniCredit SpA||BBB(sf)||Stable||Sep. 2017|
|GEI 14||Commerzbank AG||BBB+(sf)||Stable||Sep. 2017|
|Security class||Underlying Linked Credit||Rating||Outlook||Last Rating|
|GEI 1||Investec Bank plc||BBB+(sf)||Stable||Jan. 2020|
|GEI 2||Emirates NBD PJSC||BBB+(sf)||Stable||Mar. 2020|
|GEI 3||HSBC Bank plc||BBB+(sf)||Stable||Apr. 2020|
|GEI 4||Goldman Sachs Group Inc||BBB+(sf)||Stable||Apr. 2020|
|GEI 5||UBS AG/Stamford CT||BBB+(sf)||Stable||Apr. 2020|
|GEI 6||Scottish Widows Limited||BBB+(sf)||Stable||Apr. 2020|
|GEI 7||Fidelity International Ltd||BBB+(sf)||Stable||Jan. 2020|
|GEI 8||Sasol Financing International plc||BB(sf)||Negative||Apr. 2020|
|GEI 10||Barclays Bank plc||BBB+(sf)||Stable||Apr. 2020|
|GEI 11||MTN Mauritius Investments||BB+(sf)||Negative||Apr. 2020|
|GEI 12||Raiffeisen Bank International||BBB+(sf)||Stable||Mar. 2020|
|GEI 13||UniCredit SpA||BBB(sf)||Stable||Apr. 2020|
|GEI 14||Commerzbank AG||BBB+(sf)||Negative||Apr. 2020|
|Account Bank||A bank where the transaction account is held.|
|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.|
|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.|
|Dividend||The portion of a company’s after-tax earnings that is distributed to shareholders.|
|Downgrade||The rating has been lowered on its specific scale.|
|Equity Investment||An instrument that signifies an ownership position of shares of stock in a company that is either listed or traded on a stock exchange (also known as a counter) or are unlisted.|
|Equity||Equity is the holding or stake that shareholders have in a company. Equity capital is raised by the issue of new shares or by retaining profit.|
|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. In insurance, it refers to an individual or company’s vulnerability to various risks|
|Hedge||A form of risk management aimed at mitigating financial loss or other adverse circumstances. May include taking an offsetting position in addition to an existing position. The correlation between the existing and offsetting position is negative.|
|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.|
|International Scale Rating||An opinion of creditworthiness relative to a global pool of issuers and issues.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Private||An issuance of securities without market participation, however, with a select few investors. Placed on a private basis and not in the open market.|
|Proceeds||Funds from issuance of debt securities or sale of assets.|
|Rating Outlook||See GCR Rating Scales, Symbols and Definitions.|
|Rating Watch||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.|
|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.|
Salient Points 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 ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The credit ratings have been disclosed to the rated party. The rating was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings. The rated entity participated in the rating process via face-to-face management meetings, 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:
Daily Investment reports received on a weekly basis.