Johannesburg, 7 September 2018 — Global Credit Ratings (“GCR”) has published its updated Global Master Structured Finance Rating Criteria and Global Consumer Asset-Backed Securitisations (“ABS”) Rating Criteria after receiving comments from various participants in the Debt Capital Markets.
GCR has updated its Global Master Structured Finance Rating Criteria (the “SF Criteria”) as well as its Global Consumer Asset-Backed Securitisations Rating Criteria (the “ABS Criteria”, together the “Criteria”). The SF Criteria lay down the fundamental considerations for any Structured Finance transaction rated by GCR. The SF Criteria are the overarching criteria for all Structured Finance transactions and are complemented by asset class specific criteria published by GCR. The ABS Criteria explain in particular GCR’s rating approach to securitisations of consumer receivables, which include car loans, personal loans, consumer loans and equipment leases.
The Global Master Structured Finance Rating Criteria dated September 2018 and the Global Consumer Asset-Backed Securitisations Rating Criteria dated September 2018, are an update to the versions published in February 2017 and May 2017, respectively. There are significant amendments to the ABS Criteria and GCR expects the update to have a significant impact on existing Structured Finance ratings, in particular to cause an uplift in some the ratings currently assigned by GCR.
As a result, GCR places all ABS transactions affected by the ABS Criteria under review. GCR will reassess these transactions in light of the updated criteria within the next six months. The Transactions affected by the New ABS methodology are:
- MW Asset Rentals (RF) Limited;
- South African Securitisation Programme (RF) Limited – Series 1;
- South African Securitisation Programme (RF) Limited – Series 2;
- South African Securitisation Programme (RF) Limited – Series 3;
- Nitro Securitisation 6 (RF) Limited;
- Mmela Mobility Finance (RF) Limited;
- Compass Securitisation (RF) Limited.
The updated Criteria are available at www.globalratings.net.
Sector Head: Structured Finance Ratings
+27 11 784 1771
Chief Ratings Officer
+27 11 784 1771
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.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY
|Agent||An agreement where one party (agent) concludes a juristic act on behalf of the other (principal). The agent undertakes to perform a task or mandate on behalf of the principal.|
|Asset||An item with economic value that an entity owns or controls.|
|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).|
|Credit||A contractual agreement in which a borrower receives something of value now, and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company|
|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 Risk||The probability or likelihood that a borrower or issuer will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred).|
|Debt||An obligation to repay a sum of money.|
|Insurance||Provides protection against a possible eventuality.|
|International Scale Rating LC||International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Lease||Agreement or temporary use and enjoyment of a corporeal thing (movable or immovable property) the whole or part thereof for rent. The essential elements of a contract of lease are: 1.) Undertaking of lessor to give the lessee the use and enjoyment of something; 2.) Agreement between the lessor and lessee that the lessee’s right to use and enjoyment is temporary; and 3.) Lessee’s undertaking to pay a sum or rent.|
|Liability||All financial claims, debts or potential losses incurred by an individual or an organisation.|
|Liquidity||The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity.|
|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.|
|Loan||A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|Long-Term Rating||A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.|
|Loss||A tangible or intangible, financial or non-financial loss of economic value.|
|Market||An assessment of the property value, with the value being compared to similar properties in the area.|
|Mortgage Loan||A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|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.|
|Provision||An amount set aside for expected losses to be incurred by a creditor.|
|Securities||Various instruments used in the capital market to raise funds.|
|Security||An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.|
|Short-Term Rating||A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.|
|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.|
|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.|