Johannesburg, 21 August 2014 — Global Credit Rating Co. (‘GCR’) has affirmed the final, public long term credit ratings accorded to the following notes (collectively the ‘Notes’) issued by Fintech Receivables 2 (RF) Limited (‘FR2’ or the ‘Transaction’) on 15 August 2013.
ZAR 519m, Class A floating rate notes, stock code FR2A4A, due 15 September 2023:…….‘AAA(ZA)(sf)’, Outlook Stable.
ZAR 54m, Class B floating rate notes, stock code FR2A4B, due 15 September 2023:……….‘AA(ZA)(sf)’, Outlook Stable.
ZAR 49m, Class C floating rate notes, stock code FR2A4C, due 15 September 2023:…….…..‘A(ZA)(sf)’, Outlook Stable.
ZAR 43m, Class D floating rate notes, stock code FR2A4D, due 15 September 2023:……..‘BBB(ZA)(sf)’, Outlook Stable.
FR2 is a public securitisation of equipment leases originated by Fintech Underwriting (Pty) Limited (‘FUN’), a wholly-owned subsidiary of Fintech Propriety Limited (‘Fintech’). The Notes were issued on 15 August 2013 as indicated above. In addition, a subordinated loan of R56.5m was provided to FR2 by Fintech. The proceeds of the notes issued and the subordinated loan were used to fund FR2’s portfolio of equipment leases.
RATING RATIONALE
The rating of the Notes is derived by applying GCR’s Global Consumer ABS Rating Criteria and Global Structured Finance Rating Criteria. GCR reviewed the performance of leases originated by FUN in respect of FR2 for the period from Q1 2004 to Q2 2014. GCR was provided with the applicable monthly management reporting packs and investor reporting packs for the term relating to the review period. For more information, please read the Fintech Receivables 2 (RF) Limited – August 2014 Surveillance Report published on 21 August 2014. The Surveillance Report is available to subscribers of GCR’s Structured Finance subscription service.
GCR noted that no Stop Issuance Events or Stop Purchase covenants were breached over the review period, with the Arrears Reserve being maintained well above the required level of 75%. In percentage terms, the arrears reserve accounted for an unchanged 100% of aggregate nominal NPLs and legal accounts as at end June 2014 (98.5% at end August 2013). In terms of Portfolio Eligibility Criteria covenants, there were no concentration criteria breaches. Noting that, the Top 30 Obligors accounted for a higher 21.2% as at end June 2014, compared to the 20.7% reported in December 2013 albeit, remaining well below the Top 30 maximum concentration criteria of 25%.
The final, public rating accorded to the ‘AAA(ZA)(sf)’ rated securities 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. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
NATIONAL SCALE RATINGS HISTORY
Initial rating (August/2013)
Class A (FR2A4A): AAA(ZA)(sf); Outlook: Stable
Class B (FR2A4B): AA(ZA)(sf); Outlook: Stable
Class C (FR2A4C): A(ZA)(sf); Outlook: Stable
Class D (FR2A4D): BBB(ZA)(sf); Outlook: Stable
Last rating (February/2014)
Class A (FR2A4A): AAA(ZA)(sf); Outlook: Stable
Class B (FR2A4B): AA(ZA)(sf); Outlook: Stable
Class C (FR2A4C): A(ZA)(sf); Outlook: Stable
Class D (FR2A4D): BBB(ZA)(sf); Outlook: Stable
ANALYTICAL CONTACTS
Mark Vrdoljak
Analyst
+27 11 784 1771
markvrd@globalratings.net
Committee Chairperson
Emma-Jane Fulcher
Head of Structured Finance
+27 11 784 1771.
fulcher@globalratings.net
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
• Global Structured Finance Rating Criteria – (revised February 2014);
• Global Consumer ABS Rating Criteria (April 2014);
• FR2 New Issuance Report (August’13).
• FR2 Surveillance Report (Feb’14).
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.
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 docum
ent.
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 rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating.
The information received from the Arranger and other reliable third parties to accord the credit ratings included the latest Issuer’s audited annual financial statements for the year ending 30 June 2013; portfolio performance data relating to the underlying equipment lease portfolio covering the period January 2004 – June 2014; an overview of the Issuer’s lease portfolio as per 30 June 2014; monthly management reporting packs and quarterly investor reporting packs.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY
Arrears Reserve |
An accounting provision made in a reserve fund for arrears. |
Credit Rating |
A rating accorded to the performance of either ultimate or timely payment of obligations. |
Credit Rating Agency |
A party that provides an opinion on the credit quality of assets, debt securities and companies. |
Credit Risk |
The probability or likelihood that a borrower will not meet it’s debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred). |
Delinquency |
When a receivable is overdue and not paid on it’s payment due date. |
Eligibility Criteria |
Limitations imposed on the type and quality of assets that can be sold by the Originator / Servicer into the Securitisation vehicle which ensure the transaction will track the performance of historical data analysed as closely as possible. |
Floating Rate Notes |
Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR. |
JIBAR |
Johannesburg Interbank Agreed Rate. A reference rate. |
Lien |
A right of retention of someone else’s property due to expensed money or labour on property acquires a lien until payment is made. |
Liquidity Risk |
The risk that a financial instrument cannot be traded on it’s market price due to the size of the market. |
Property |
Movable or immovable asset. |
Rated Securities |
Debt securities that have been accorded a credit rating. |
Reference Rate |
A rate that is the basis of the calculation such as JIBAR. |
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. |
Securitisation Vehicle |
A Special Purpose Vehicle that has been created to guarantee the performance of the obligations of the Issuer that sold its assets to the Guarantee SPV. |
Special Purpose Vehicle |
A Special Purpose Vehicle that has been created to guarantee the performance of the obligations of the Issuer that sold its assets to the Guarantee SPV. |
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. |
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. |