Johannesburg, 17 December 2015 – Global Credit Ratings (“GCR”) has downgraded the international scale local currency ratings of various South African banks and non-bank financial institutions, following a recalibration of the mapping tables used for issuers/companies rated in South Africa. The national sale ratings of impacted issuers/companies have all been affirmed.
The updated mapping table (released publically by GCR on 14 December 2015) follows a recent revision of the Republic of South Africa’s international scale local currency Issuer Default Rating (from ‘BBB+’ with a Negative outlook to ‘BBB’ with a Stable outlook). Furthermore, the South African country ceiling has been lowered from ‘A-‘ to ‘BBB’.
The rating actions taken do not reflect a change in key rating factors applicable to the credit profiles of the issuers/companies listed below, barring the impact of sovereign risk. Rather, the ratings reflect changes in the mapping between national scale ratings and international scale ratings, as a result of increasing compression in the number of national scale rating notches allocated to each international scale rating notch, following the sovereign downgrade.
GCR will continue to monitor developments related to the sovereign and will respond to any impact on criteria and ratings.
Rating action on the following entities’ long-term (“LT”) international scale ratings and outlooks was taken:
*Unsolicited/Public information ratings.
The national scale ratings and outlooks of the following entities were affirmed:
*Unsolicited/Public information ratings.
Sector Head: Financial Institution RatingsTitle2
(011) 784 – 1771Telephone2
Head: Insurance Ratings
(011) 784 – 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Global Criteria for Rating Banks and Other Financial Institutions, updated March 2015
GCR’s Global Criteria for Rating Finance and Leasing Companies, updated March 2015
GCR’s South African Mapping Table, updated December 2015
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 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 issuers/companies listed above with no contestation of the ratings.
The ratings above are a combination of solicited and unsolicited ratings. In the case of solicited ratings, GCR has been compensated for the provision of the ratings. In the case of unsolicited ratings, the ratings are accorded based on publicly available information, and are provided for public information purposes.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S FINANCIAL INSTITUTIONS GLOSSARY
|Credit Rating||An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.|
|Credit Rating Agency||An entity that provides credit rating services.|
|Credit Risk||The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and/or interest when due.|
|Creditworthiness||An assessment of a debtor’s ability to meet debt obligations.|
|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.|
|Default||Failure to meet the payment obligation of either interest or principal on a debt or bond. Technically, a borrower does not default, the initiative comes from the lender who declares that the borrower is in default.|
|Downgrade||The assignment of a lower credit rating to a company or sovereign borrower’s debt by a credit rating agency. Opposite of upgrade.|
|Financial Institution||An entity that focuses on dealing with financial transactions, such as investments, loans and deposits.|
|International Scale Rating||ISRs relate to either foreign currency or local currency commitments, assessing the capacity of an issuer to meet these commitments using a globally applicable (and therefore internationally comparable) scale.|
|National Scale Rating||The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Provision||The amount set aside or deducted from operating income to cover expected or identified loan losses.|
|Risk||The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.|
|Sovereign Risk||The risk of default by the government of a country on its obligations.|