Announcements Rating Alerts Structured Finance

GCR affirms the ratings assigned to Global Equity Investments 7, 13 and 14 Limited

Rating Action

Johannesburg, 29 October 2019 – GCR Ratings (“GCR”) has affirmed the international scale long term ratings and Outlooks assigned to the securities issued by the Primary Investment Vehicle (“PIV”) trading as Global Equity Investments (“GEI”) 7, GEI 13 and GEI 14.

These rating actions follow a change in the ratings and/or Outlooks related to some of the underlying linked credits, and reflect the lower of either these changes or the ‘BBB+(sf)‘ rating cap introduced at the June 2019 review.

PIV

Underlying Linked Credit

Rating class

Rating scale

Rating

Outlook / Watch

GEI 7

Fidelity International Ltd

Long Term

International

BBB+(sf)

Stable Outlook

GEI 13

UniCredit SpA

Long Term

International

BBB(sf)

Stable Outlook

GEI 14

Commerzbank AG

Long Term

International

BBB+(sf)

Stable Outlook

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 will have an underlying exposure to a single credit counterparty.

Rating Rationale

Rating Cap

The transaction was assessed in June 2019 under GCR’s Criteria for Rating Structured Finance Transactions updated in September 2018. At the time, 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 (the Custodian Account Bank through which dividends are paid), or Investec Bank Plc (the Hedge Provider).

Investec Bank Plc is currently rated ‘BBB+’ with a Stable Outlook by GCR Ratings. Standard Chartered Bank, Singapore is rated ‘Aa3’ by Moody’s Investors Service (“Moody’s”) with a Stable Outlook. The rating cap has been maintained at the lower ‘BBB+’ rating with a Stable Outlook.

Underlying Linked Credit Rating Movements

In October 2019, Moody’s affirmed its rating assigned to Fidelity International Ltd at ‘Baa1’ with a Stable Outlook. GCR has affirmed the GEI 7 ratings with a Stable Outlook to reflect the lower of this rating and the rating cap.

In September 2019, S&P Global Ratings affirmed its rating assigned to UniCredit SpA at ‘BBB’ with a Stable Outlook. GCR has affirmed the GEI 13 ratings with a Stable Outlook. This reflects the middle rating and Outlook of UniCredit SpA when the ratings from the three rating agencies which have assigned ratings to UniCredit SpA are compared.

In September 2019, Fitch Ratings revised the Outlook of its rating assigned to Commerzbank AG to Negative from Stable. GCR has affirmed the GEI 14 ratings with a Stable Outlook. This reflects the rating cap.

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.

Analytical Contacts

Primary Analyst

Gary Nyoni

Structured Finance Analyst

Johannesburg, ZA

GaryN@GCRratings.com

+27 11 784 1771
     

Secondary Analyst

Tinashe Mujuru

Structured Finance Analyst

Johannesburg, ZA

TinasheM@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

Ratings History

Global Equity Investments 1-14 Limited

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

Jun. 2019

GEI 2

Emirates NBD PJSC

BBB+(sf)

Stable

Jun. 2019

GEI 3

HSBC Bank Plc

BBB+(sf)

Stable

Jun. 2019

GEI 4

Goldman Sachs Group Inc

BBB+(sf)

Stable

Jun. 2019

GEI 5

UBS AG/Stamford CT

BBB+(sf)

Stable

Jun. 2019

GEI 6

Scottish Widows Limited

BBB+(sf)

Stable

Jun. 2019

GEI 7

Fidelity International Ltd

BBB+(sf)

Stable

Jun. 2019

GEI 8

Sasol Financing International Plc

BBB-(sf)

Negative

Aug. 2019

GEI 10

Barclays Bank Plc

BBB+(sf)

Stable

Jun. 2019

GEI 11

MTN Mauritius Investments

BB+(sf)

Negative

Jun. 2019

GEI 12

Raiffeisen Bank International

BBB+(sf)

Stable

Jun. 2019

GEI 13

UniCredit SpA

BBB(sf)

Stable

Aug. 2019

GEI 14

Commerzbank AG

BBB+(sf)

Stable

Jun. 2019

Glossary of Terms/Acronyms

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.

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.

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.

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.

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 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 instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument; 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 credit ratings have been disclosed to the Arranger. The ratings above were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.

The Arranger 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 information received from the Arranger and other reliable third parties to accord the credit ratings included:

  • Daily Investment reports received on a weekly basis.

 

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