Announcements

Global Trade Receivables Securitisation Rating Criteria – Revised Methodology Published

Johannesburg, 31 May 2017 — Global Credit Rating Co. (Pty) Ltd (“GCR”) has published its updated Global Trade Receivables Securitisation Rating Criteria (the “Criteria”).

RATIONALE

GCR has updated its Global Trade Receivables Securitisation Rating Criteria. Each trade receivables securitisation is unique and the methodology may require certain adjustments depending on the specifics of each transaction. However, the following general approach can be used as a guideline for all trade receivables transactions. GCR considers both qualitative and quantitative factors in its approach. In addition to the review of the originator/servicer and underlying collateral/obligor characteristics, GCR analyses the legal and structural issues as well as the operational capabilities of all key transaction parties, in determining the appropriateness of the credit enhancement provided before according a rating to a trade receivables transaction. Trade receivables are unsecured obligations generated when a business sells goods or services on credit. Typically they are non-interest bearing, obligors will be more concentrated than in a consumer ABS transaction, and performance is driven by the originator’s underwriting policies, strategic direction, financial condition and relationships with sellers.

The Criteria is an update to the version published in May 2016. There are no significant amendments to the Criteria. The update of this Criteria will not have an impact on any existing transactions that have been rated under it. Going forward, all new transactions will be rated using this updated Criteria.

This criteria should be read in conjunction with GCR’s published ‘Global Structured Finance Rating Criteria, updated February 2017’.

The updated Criteria is available at www.globalratings.net.

ANALYTICAL CONTACTS

Primary Analyst

Emma-Jane Fulcher

Sector Head: Structured Finance Ratings

+27 11 784 1771

fulcher@globalratings.net

Committee Chairman

Marc Chadwick

Sector Head: Insurance Ratings

+27 11 784 1771

chadwick@globalratings.net

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

Collateral An asset pledged as security in event of default.
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 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.
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.
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.
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.
Obligor The party indebted or the person making repayments for its borrowings.
Originator An entity that created assets and hold on balance sheet for securitisation purposes.
Receivables General term for economic benefit derived from an asset.
Securitisation Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.
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.
Trade Receivables A legally enforceable claim for payment to a business by its customer or clients for goods supplied and or services rendered in execution of the customer’s order.
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.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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