29 August 2019 – GCR Ratings (“GCR”) has affirmed the ratings assigned to the Primary Investment Vehicle (“PIV”) trading as Global Equity Investments (“GEI”) 8 and revised the Outlook to Negative. At the same time, GCR has withdrawn the ratings assigned to GEI 9. The ratings assigned to GEI 13 have been affirmed and the Outlook revised to Stable. 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.
The international ratings assigned to the GEI PIVs relate to timely payment of dividends and principal. The ratings exclude an assessment of the ability by 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.
The transaction was assessed in June 2019 under GCR’s updated Global Master Structured Finance Rating Criteria. At the time, GCR’s analysis 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 (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 May 2019, Moody’s revised its Outlook for its Sasol Financing International Plc rating to Negative. GCR has revised the GEI 8 Outlook to reflect this movement.
In July 2019, Moody’s which was the only agency with an Old Mutual Plc rating withdrew its rating. GCR has subsequently withdrawn the GEI 9 rating. It is also noted that the transaction does not have any exposure to GEI 9.
In July 2019, S&P Global Ratings revised its Outlook for its UniCredit SpA rating to Stable. GCR has revised the GEI 13 Outlook to reflect the middle rating and Outlook from the three rating agencies that have assigned a rating to UniCredit SpA.
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. Please click on the link below:
|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
|Global Master Structured Finance Rating Criteria, September 2018|
|Global Credit Linked Note and Repackaging Vehicle Rating Criteria, November 2018|
|Global Equity Investments 1-14 Limited Surveillance Report, June 2019|
|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 9||Old Mutual 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||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)||Stable||Jun. 2019|
|GEI 9||Old Mutual Plc||BB+(sf)||Stable||Jun. 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)||Negative||Jun. 2019|
|GEI 14||Commerzbank||BBB+(sf)||Stable||Jun. 2019|
|Account Bank||A bank where the transaction account is held.|
|Agency||An insurance sales office which is directed by an agent, manager, independent agent, or company manager.|
|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.|
|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||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|
|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.|
|Shareholder||An individual, entity or financial institution that holds shares or stock in an organisation or company.|
|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.