Johannesburg, 04 Jul 2014 — Global Credit Ratings has affirmed the primary and special servicer ratings assigned to Real People Investment Holdings Limited of SQ2(ZA) and SQ2+(ZA) respectively; with the outlooks accorded as Negative.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above rating(s) to Real People Investment Holdings Limited based on the following key criteria:
General: The primary servicer rating reflects Real People Investment Holdings Limited’s (“Real People” or “the group”) adequate internal controls/systems, shareholder strength and servicing experience (as administrator and/or principal) in the domestic micro-lending and collections industry. The special servicer rating reflects the group’s ability to reactivate and/or work out loans, as well as its internal control environment and financial condition. This is supported by a large merchant lending channel, affiliate and call centre infrastructure.
Ownership: A strong shareholder profile is reflected, with Old Mutual maintaining a sizeable stake. Several of the leading international development finance institutions also hold stakes in the group.
Corporate governance and management: Real People displays strong corporate governance; with a high level of transparency, substantial controls and systems, and a well-structured independent directorate. Note, however, was taken of the changes in key management positions.
Staff training and welfare programs: The group has a comprehensive training and development program in place, as well as voluntary access to medical/health and provident/retirement schemes; part of the group’s employee value proposition, and is an integral part to attract/retain skills.
Robust internal control environment: The group displays a strong debtors management capability, augmented by robust ICT systems. A comprehensive collections methodology, successfully integrated into its ICT infrastructure, has enabled Real People to develop one of the leading collections track records in the country.
Industry standard technology: The group uses industry standard servicing technology, accounting and reporting systems. Overall, the technology infrastructure is deemed flexible, secure, stable and reliable. .
Financial condition: On the back of a tightening operating environment, the group recorded substantial losses in F14, heavily weighed down by margin compression and a significant increase in loan loss impairments. Furthermore, balance sheet strength, capitalisation and cash flow management also came under considerable pressure.
The ‘Negative’ rating outlooks are synonymous with the group’s credit rating outlooks; given the level of service integration within the group.
Positive rating change/s: Further progress in the group’s market positioning, trading performance, financial profile and portfolio collections track record (both principal and agency collections).
Negative rating change/s: A downgrade of the group’s credit rating(s), recurring losses (providing a weakened buffer to counter the inherent risk in its business model) and/or a deterioration in collection statistics, could exert downward pressure on the ratings.
For a detailed glossary of terms utilised in this announcement please click here
NATIONAL SCALE RATINGS HISTORY
Initial rating (Jun/2009)
Servicer quality: SQ2(ZA);
Last rating (Dec/2013)
Primary Servicer: SQ2(ZA);
Special Servicer: SQ2+(ZA)
Head: Financial Institution Ratings
Head: Insurance Ratings
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
RATING LIMITATIONS AND DISCLAIMERS
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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; c.) such rating was an independent evaluation of the risks and merits of the rated entity; and d.) the validity of the rating is for 12 months, or as indicated by the applicable credit rating document.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
Real People Investment Holdings Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit ratings above were disclosed to Real People Investment Holdings Limited with no contestation of/changes to the ratings.
The information received from Real People Investment Holdings Limited and other reliable third parties to accord the credit rating included the latest audited annual financial statements as at 31 March 2014 (plus four years of comparative numbers), most recent year to date management accounts to 31 May 2014, and a breakdown of facilities available and related counterparties.
GCR affirms Real People Investment Holdings Limited’s primary and special servicer ratings of SQ2(ZA) and SQ2+(ZA); Outlooks Negative.