Announcements Rating Alerts Structured Finance

GCR affirms the ratings assigned under the South African Securitisation Programme (RF) Ltd – Series 1, Outlooks Stable

Rating Action

Johannesburg, 20 August 2021 – GCR Ratings (“GCR”) has affirmed the long-term issue credit ratings assigned to the Notes issued under the South African Securitisation Programme (RF) Limited – Series 1 (“SASP 1” or the “Issuer”) with Stable Outlooks.

Security Class Stock Code Balance Rating class Rating scale Rating Outlook / Watch
Class A25 ERSA25 R281,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class A26 ERSA26 R178,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class A27 ERSA27 R230,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class A28 ERSA28 R263,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class B6 ERS3B6 R16,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class B7 ERS3B7 R99,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class C6 ERS3C6 R6,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook
Class C7 ERS3C7 R35,000,000 Long Term Issue National AAA(ZA)(sf) Stable Outlook

The rating action reflects the unchanged capital structure post the annual review, the updated asset performance and GCR’s credit and cash flow analysis using the most recent collateral data as at July 2021. GCR also performed a re-rating exercise given the amended credit risk assumptions. The ratings also reflect the credit enhancement levels which are modelled as per the 12.54% overcollateralisation covenant.

The transaction is currently in its Revolving Period. However, as per GCR’s Criteria for Rating Structured Finance Transactions, the cash flows were modelled as per the Pre-Enforcement Priority of Payments applicable in an Amortisation Period.

The public credit ratings assigned to the Class A Notes relate to timely payment of interest and ultimate payment of principal by their respective Final Maturity Date, while the ratings assigned to the Class B and Class C Notes relate to ultimate payment of interest and ultimate payment of principal by their respective Final Maturity Date. The ratings exclude an assessment of the ability of the Issuer to pay either any early repayment or default interest rate penalties.

SASP 1 is the first of three series of the R5bn multi-seller segregated asset-backed note programme of rental and equipment lease financed assets originated by Sasfin Bank Ltd (“Sasfin”). SASP 1 and SASP Series 3 are primarily made up of office equipment leases, while SASP Series 2 is primarily made up of capital asset leases.

Rating Rationale

Capital Structure

The capital structure has remained unchanged over the review period. GCR modelled a starting asset balance of R1,246.9m in performing assets in order to meet the 12.54% overcollateralisation requirement plus the R116.1m defaults as at June 2021, which sums up to R1,363.0m. This translates into an asset to notes ratio of 1.23x (August 2020 review: 1.21x).

Counterparty Risk

GCR’s view of the counterparty risk remains the same as at the June 2019 review, where the risk was assessed to be in line with GCR’s criteria. GCR notes the servicing risk posed by the COVID-19 pandemic and the related lockdown and social distancing practices. Servicing is being done remotely and to date, this has had no material impact on the overall collections and servicing process.

Amendments to the transaction documents relating to permitted investments which need both investor and Johannesburg Stock Exchange (“JSE”) approval, have not yet been done as previously anticipated by the Issuer. This is as the Issuer is awaiting a conclusion to the anticipated changes of the JSE Debt Listing Requirements. The Issuer has however, provided GCR a letter which illustrates how permitted investments are managed. GCR deems the current procedure to be in line with GCR’s criteria.

Credit Risk

GCR considered the cumulative default rates and recovery rates by analysing the historical vintage data. The default vintage curves (data between June 2002 and June 2021) show some marginal deterioration in performance, while the recovery vintage curves (data between March 2002 and June 2021) exhibit some slight improvement. GCR has amended its credit risk assumptions to reflect the most recent data, translating into a calculated net loss rate of 3.17% (previous: 2.77%).

  Current Previous
Default base case 4.16% 3.53%
Recovery base case 23.84% 21.70%
Calculated net loss rate 3.17% 2.77%

Source: Sasfin data and GCR calculations

Cash Flow Analysis

GCR’s cash flow analysis reflects the application of the different stress levels in an amortising Pre-Enforcement scenario at each rating level as per GCR’s Criteria for Rating Consumer Asset Backed Securities, GCR’s assessment of the transaction’s capital structure, the asset performance and GCR’s cash flow assumptions.

GCR’s analysis and cash flow model indicates that there is sufficient credit enhancement for the Class A, Class B and Class C Notes to withstand the assumed credit and cash flow risks under a ‘AAA(ZA)(sf)’ rating scenario.

Net Default Trigger Amendment

GCR has taken cognisance of the SENS announcement recently released by the Issuer relating to the amendment of the Net Default Test Event for SASP 1. In this regard, GCR’s analysis shows that the amendment does not have a negative impact on the ratings assigned to the Notes issued by SASP 1. In conducting its analysis, GCR considered the following: 1) Historical levels of the net default ratio compared to the increased Net Default Test level from 2.625% to 4%); 2) whether the amended Net Default Test Event level may effectively end the Revolving Period upon a situation of negative excess spread/decrease in credit enhancement available to the Notes; 3) identification of other triggers that would effectively end the Revolving Period upon a situation of negative excess spread/decrease in credit enhancement available to the Notes; 4) incorporation of the amendment into GCR’s modelling of the cash flows available in Series 1.

Ratings Sensitivities

GCR noted that the proportion of loans affected by payment holidays has decreased significantly since May 2020 and holidays have not been granted since August 2020. As such, cash flow disruption analysis was not deemed necessary.

In relation to the credit risk, GCR stressed the cash flows generated by the structure in a combination of increased default probability affecting the asset portfolio and decreased recoveries upon default.

The results suggest that the Class A and Class B Notes have sufficient credit enhancement to withstand additional stresses, while the ratings of the Class C Notes are resilient to moderate additional stresses over short to medium term horizons.

Class A Notes – AAA(ZA)(sf)
+15% Defaults -15% Recoveries +15% Defaults/-15% Recoveries +30% Defaults -30% Recoveries +30% Defaults/-30% Recoveries
AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf)
Class B Notes – AAA(ZA)(sf)
+15% Defaults -15% Recoveries +15% Defaults/-15% Recoveries +30% Defaults -30% Recoveries +30% Defaults/-30% Recoveries
AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf)
Class C Notes – AAA(ZA)(sf)
+15% Defaults -15% Recoveries +15% Defaults/-15% Recoveries +30% Defaults -30% Recoveries +30% Defaults/-30% Recoveries
AAA(ZA)(sf) AAA(ZA)(sf) AAA(ZA)(sf) AA+(ZA)(sf) AAA(ZA)(sf) AA(ZA)(sf)

Source: GCR ratings

Operational Review

GCR performed an operational review with Sasfin in June 2021. There were no major changes or proposed changes to the operations, policies and/ or systems. GCR remains comfortable with the Servicer’s ability to perform its obligations. GCR notes that the implementation of Leasewave, the new debtors’ ledger system which is a central house of data as opposed to three systems previously used has been completed and so far, all issues that resulted from the transition have been resolved.

Surveillance and Monitoring

GCR continuously monitors the performance of SASP 1 and publishes the Monitoring Dashboards on its website. The most recent Dashboard covers the period from February 2020 to February 2021.

Analytical Contacts

Primary Analyst Siyuan Lu Structured Finance Analyst
Johannesburg, ZA SiyuanL@GCRratings.com +27 11 784 1771
Secondary Analyst Kyle Bales Structured Finance Analyst
Johannesburg, ZA KyleB@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 Consumer Asset Backed Securities, September 2018
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Financial Institutions, May 2019
GCR Financial Institution Sector Risk Scores, June 2021
Sasfin Bank Ltd July 2021 Ratings Review
SASP Series 1 New Issuance Report, September 2020

Ratings History

South African Securitisation Programme (RF) Limited – Series 1

Security class Stock code Rating Outlook Initial Rating
Class A25 ERSA25 AAA(ZA)(sf) Stable Aug. 2017
Class A26 ERSA26 AAA(ZA)(sf) Stable Jun. 2019
Class A27 ERSA27 AAA(ZA)(sf) Stable Aug.2019
Class A28 ERSA28 AAA(ZA)(sf) Stable Aug. 2020
Class B6 ERS3B6 AAA(ZA)(sf) Stable Jun. 2019
Class B7 ERS3B7 AAA(ZA)(sf) Stable Aug. 2019
Class C6 ERS3C6 AAA(ZA)(sf) Stable Jun. 2019
Class C7 ERS3C7 AAA(ZA)(sf) Stable Aug. 2019
Security class Stock code Rating Outlook Last Rating
Class A25 ERSA25 AAA(ZA)(sf) Stable Aug. 2020
Class A26 ERSA26 AAA(ZA)(sf) Stable Aug. 2020
Class A27 ERSA27 AAA(ZA)(sf) Stable Aug. 2020
Class A28 ERSA28 AAA(ZA)(sf) Stable Aug. 2020
Class B6 ERS3B6 AAA(ZA)(sf) Stable Aug. 2020
Class B7 ERS3B7 AAA(ZA)(sf) Stable Aug. 2020
Class C6 ERS3C6 AAA(ZA)(sf) Stable Aug. 2020
Class C7 ERS3C7 AAA(ZA)(sf) Stable Aug. 2020

Glossary of Terms/Acronyms

Amortisation From a liability perspective, the paying off of debt in a series of instalments over a period of time. From an asset perspective, the spreading of capital expenses for intangible assets over a specific period of time (usually over the asset’s useful life).
Applicable Pricing Supplement A transaction document that describes the particulars of notes issued.
Asset Backed Securities Securitisation: debt securities issued that are backed or covered by a pool of assets or receivables (Auto loans and leases, consumer loans, commercial assets, credit cards, mortgage loans).
Capital The sum of money that is invested to generate proceeds.
Collateral Asset provided to a creditor as security for a loan or performance.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
Credit Enhancement Limited protection to a transaction against losses arising from the assets. The credit enhancement can be either internal or external. Internal credit enhancement may include: Subordination; over-collateralisation; excess spread; security package; arrears reserve; reserve fund and hedging. External credit enhancement may include: Guarantees; Letters of Credit and hedging.
Credit Risk The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and interest when due.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Debtor The party indebted or the person making repayments for its borrowings.
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.
Enforcement To make sure people do what is required by law or rule et cetera.
Haircut The percentage by which the market value of an asset is reduced. The size of the haircut reflects the expected ease of selling the asset and the likely reduction necessary to realised value relative to the fair value.
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.
Liability All financial claims, debts or potential losses incurred by an individual or an organisation.
Liquidity Risk The risk that a company may not be able to meet its financial obligations or other operational cash requirements due to an inability to timeously realise cash from its assets. Regarding securities, the risk that a financial instrument cannot be traded at its market price due to the size, structure or efficiency of the market.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.
Loss 1. A tangible or intangible, financial or non-financial loss of economic value. 2. The happening of the event for which insurance pays (insurance).
Market An assessment of the property value, with the value being compared to similar properties in the area.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Net Loss The amount of loss sustained by an insurer after giving effect to all applicable reinsurance, salvage, and subrogation recoveries.
Obligation The title given to the legal relationship that exists between parties to an agreement when they acquire personal rights against each other for entitlement to perform.
Origination A process of creating assets.
Performing An obligation that performs according to its contractual obligations.
Pool An organisation of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed-upon amounts.
Portfolio A collection of investments held by an individual investor or financial institution. They may include stocks, bonds, futures contracts, options, real estate investments or any item that the holder believes will retain its value.
Prepayment Any unscheduled or early repayment of the principal of a mortgage/loan.
Refinance The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.
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.
Servicer A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.
Servicing The calculation of interest and repayments, collection of repayments, advancing of loans, foreclose procedures, maintaining records and seeing that the proceeds of each loan are passed on to the respective party.
Subordinated Loan A loan typically given by the Issuer to the securitisation vehicle that is more junior than a junior tranche.
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.
Ultimate Payment A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.
Weighted Average An average resulting from the multiplication of each component by a factor reflecting its importance or, relative size to a pool of assets or liabilities.
Weighted The weight that a single obligation has in relation to the aggregated pool of obligations. For example, a single mortgage principal balance divided by the aggregated mortgage pool principal balance.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the rating process 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 ratings were 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 virtual management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible:

  • Pool Cut for the Portfolio at June 2021
  • Default, recoveries and prepayments data up to June 2021
  • Other miscellaneous data


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