Johannesburg, 10 March 2016 — Global Credit Ratings (‘GCR’) has accorded a final, public short term credit rating of ‘A1+(ZA)(sf)’ to the Senior Secured ABCP Series 1 notes (‘ the Notes’) issued and to be issued by iMpumelelo CP Note Programme 1 (RF) Ltd (‘iMpumelelo’ or the ‘Issuer’) under Series 1 of its R10bn Serialised Note Programme.
The iMpumelelo Serialised Note Programme (the ‘Programme’) is registered with the Johannesburg Stock Exchange, under the Commercial Paper Regulations. The Issuer may issue listed and unlisted Notes. The ‘A1+(ZA)(sf)’ rating accorded to the Series 1 Notes in issue and to be issued is the highest short term rating on the national scale.
The Notes in issuance and to be issued under Series 1 of the Programme are administered by Absa Corporate and Investment Bank, a division of Absa Bank Limited (‘Absa’). The proceeds from the issuance of the Notes currently in issue were used to acquire underlying assets. The Series 1 Notes and Acquired Assets are segregated from any obligations or claims arising out of any other Series under the Programme. In addition to issuing Notes with a maturity of less than one year, the Issuer is able to issue Notes with a tenor greater than one year but up to a maximum of ten years.
The Series 1 Notes are fully supported by an irrevocable and unconditional guarantee issued by Absa (the ‘Absa Guarantee’) to the Series 1 Noteholders. The Absa Guarantee is specific to Series 1 and covers the Series 1 Noteholders (including Medium Term Notes Noteholders) against any losses arising out of an Event of Default or a breach by the Issuer of any of its obligations under the Transaction Documents. The Absa Guarantee also covers against a liquidity shortfall due to a payment mismatch, as well as losses associated with the default of any of the Acquired Assets.
Due to the fully supported nature of the Series 1 Notes under the Absa Guarantee, the rating of the Notes is derived from the credit rating of Absa, as Guarantor for Series 1. The current credit ratings of Absa are ‘AA+(ZA)’ and ‘A1+(ZA)’ on the long term and short term national scale respectively. The ratings were affirmed by GCR in April 2015. The Notes are thus accorded a rating of ‘A1+(ZA)(sf)’. The ‘A1+(ZA)(sf)’ rating of the Notes excludes the MTN Notes, which has a maturity of more than one year. GCR expects to be notified sufficiently in advance should the Issuer wish to issue MTN Notes. Although the rating of the Notes issued and to be issued under Series 1 is not dependent on the Acquired Assets, GCR expects to be notified in advance prior to the purchase of any additional Series 1 Assets. Should the short term rating of Absa change, it is likely that the rating of the Notes will also change.
The rating accorded to the Series 1 Notes relates to timely payment of interest and principal. The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties. In the event that the national short term rating of Absa is downgraded or withdrawn, or if the sovereign rating is downgraded or withdrawn, the rating of the Notes may follow suit. In the event that the ratings used by GCR are withdrawn, GCR may use another licensed Credit Rating Agency in accordance with Section 18(1) of the Credit Rating Services Act 24, of 2012. The rating of the Notes may also change if relevant risk presenting entities are not considered to be of sufficient credit quality anymore and no appropriate remedial action is undertaken when necessary. For more information please refer to the iMpumelelo CP Note Programme 1 (RF) Limited New Rating Report published in March 2016.
NATIONAL SCALE RATINGS HISTORY
|ABCP – Series 1|
|ABCP – Series 1|
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Sector Head: Structured Finance Ratings
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’16;
Global Asset Backed Commercial Paper Rating Criteria – Dec ’15;
Global Master Criteria for Rating Banks and Other Financial Institutions – Mar ’15; and
Absa Bank Limited Credit Rating Report – Apr ’15.
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
|Agreement||A negotiated and usually legally enforceable understanding between two or more legally competent parties.|
|Asset||An item with economic value that an entity owns or controls.|
|Capital||The sum of money that is used to generate proceeds.|
|Claim||A formal request or demand.|
|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 Rating Agency||An entity that provides credit rating services.|
|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).|
|Credit-linked Note||Structured Credit Security that combines a bond or loan with a credit derivative or links it to a rated counterparty. The normal coupon repayments remains unchanged unless a credit event associated with a pre-specific reference obligation occur. CLN is similar to a Securitisation, except there are no assets transferred to the securitisation Vehicle. Either a securitisation vehicle or Issuer can issue a CLN.|
|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.|
|Downgrade||The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.|
|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.|
|Guarantor||A party that gives the guarantee.|
|Irrevocable||Not able to be changed, reversed, recovered and final.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Liquidity||The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity.|
|Loss||A tangible or intangible, financial or non-financial loss of economic value.|
|Medium Term Notes||Debt securities with a tenor ranging from 3 months to 15 years.|
|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.|
|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.|
|Proceeds||Funds from issuance of debt securities or sale of assets.|
|Redemption||The repurchase of a bond at maturity by the issuer.|
|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.|
|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.|
|Tenor||The term or duration of a debt security.|
|Timely Payment||The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.|
|Tranche||In a structured finance, a slice or portion of debt securities offered that is structured or grouped to resemble the same degree of risk associated with the underlying asset or with a similar degree of risk. A junior tranche has a higher degree of default risk than a senior tranche.|
|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.|
|Unconditional||Not subject to any conditions.|
SALIENT FEATURES OF INDICATIVE RATINGS ACCORDED
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 Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The credit rating/s has been disclosed to the Arranger with no contestation of the rating.
The information received from the Arranger and other reliable third parties to accord the credit ratings includes the Programme Memorandum, the Series Supplement for Series 1, the Absa Guarantee, the Applicable Pricing Supplements for the issued Notes, the Administration Agreement, the Dealer Agreement, the Common Terms Agreement, the Indemnity Agreement, the Cession Agreement, the Trust Deed of the Issuer Owner Trust, the Memorandum of Incorporation of the Security SPV, the Memorandum of Incorporation of the Issuer, the Account Bank Agreement, the Security SPV Guarantee, the Master Agency Agreement and the Preference Shares Subscription Agreement.