Announcements

Grindrod Bank Limited – Senior Notes, final, public rating affirmed.

Johannesburg, 22 May 2017– Global Credit Ratings (“GCR”) has affirmed the final, public long term ‘A-(ZA)’ rating with a ‘Stable’ outlook accorded to the following Senior Unsecured Floating Rate Notes (the “Senior Notes”) issued by Grindrod Bank Limited (the “Issuer”) on 15 October 2015 under the Issuer’s DMTN programme (the “Transaction”). Grindrod Bank’s R1bn Domestic Medium Term Note (“DMTN”) Programme launched in October 2012 is backed by an irrevocable and unconditional Noteholder Guarantee.

  • ZAR 160m, Senior Floating Rate Notes, maturing 15 October 2018, stock code…………GBL02.

RATING RATIONALE

GCR has accorded the above credit rating(s) to Grindrod Bank Limited’s Senior Notes based on the following key criteria:

Grindrod Bank’s roots can be traced back to 1994 when it was granted a banking licence by the South African Reserve Bank (“SARB”). The bank is headquartered in Durban, South Africa and has offices in Johannesburg, Cape Town and Pretoria. The bank contributed 38.8% of the Grindrod Limited’s group consolidated assets at FY16 (FY15: 27.7%). Grindrod Bank issued an amount of ZAR160m (GBL02) in Senior Unsecured Floating Rate Notes in October 2015 ‘under its R1bn DMTN. The Guarantee backing Grindrod Bank’s R1bn DMTN Programme launched in October 2012 is an irrevocable and unconditional guarantee and guarantees the due and punctual performance of all obligations arising under the DMTN programme which the Issuer may incur to the Noteholders of the Notes.

Based on GCR’s Global Structurally Enhanced Corporate Bond Rating Criteria, the Issuer’s long term rating of ‘BBB+(ZA)’ and the irrevocable and unconditional Noteholder Guarantee, GCR has affirmed the final, public rating of ‘A-(ZA)’ with a ‘Stable’ Outlook accorded to the Senior Notes.

The final, public ratings accorded to the Senior Notes relate to ultimate payment of interest and principal (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity). The ratings exclude an assessment of the ability of the Issuer to pay any (early repayment) penalties. If the ratings accorded to the Issuer or the mechanics of the Guarantee change, the rating of the Senior Notes may change, but potentially not in the same quantum.

RATINGS HISTORY

Stock Code
Initial Rating
LT Rating
ST Rating
Outlook
GBL02
20 May 2016
A-(ZA)
n.a
Stable
Stock Code
Last Rating
LT Rating
ST Rating
Outlook
GBL02
20 May 2016
A-(ZA)
n.a
Stable

ANALYTICAL CONTACTS

Mark Vrdoljak

Senior Credit Analyst

+27 11 784 1771

markvrd@globalratings.net

Committee Chairperson

Eyal Shevel

Sector Head: Corporate Ratings

+27 11 784 1771

shevel@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

  • Global Structurally Enhanced Corporate Bonds Rating Criteria (Sep’16);
  • Global Criteria for Rating Banks and Other Financial Institutions (Mar’17);
  • South Africa Bank Statistical Bulletin (Dec’16);
  • Grindrod Bank Limited Financial Institutions Rating Report (Apr’17).
  • Grindrod Bank Limited Financial Institutions Press Release (Apr’17).

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
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Asset An item with economic value that an entity owns or controls.
Bond A long term debt instrument issued by either: a company, institution or the government to raise funds.
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.
Floating Rate Notes Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR.
Guarantee An undertaking for performance of another’s obligations in event of default.
Irrevocable Not able to be changed, reversed, recovered and final.
Issuer The party indebted or the person making repayments for its borrowings.
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.
Noteholder Investor of capital market securities.
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.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
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.
Senior A security that has a higher repayment priority than junior securities.
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.
Stock Code A unique code allocated to a publicly listed security.
Ultimate Payment A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.
Unconditional Not subject to any conditions.
   

SALIENT POINTS OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The Issuer and the Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.

The credit ratings have been disclosed to the Issuer with no contestation of the ratings.

The information received from Grindrod Limited and other reliable third parties to accord the credit rating(s) included:

  • Audited financial results for the year ending 31 December 2016 (plus five years of comparative data) for the Issuer;
  • Analyst presentations;
  • A legal opinion prepared by Transaction Council – Bowman Gilfillan;
  • A Final Signed Applicable Pricing Supplement for the GLB02 Notes.
  • A Signed Final Legal opinion.
  • A Signed and Executed Noteholder Guarantee.
  • Signed and executed Transaction Documentation for the Senior Notes and the DMTN Programme.
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