Announcements Rating Alerts Structured Finance

iMpumelelo CP Note Programme 1 (RF) Ltd – Series 1 Notes, Rating Affirmed

Johannesburg, 27 February 2019 — Global Credit Ratings (“GCR”) affirmed the final, public short-term credit rating of ‘A1+(ZA)(sf)’ accorded 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 final, public 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. 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 excludes the issuance of notes with a maturity of greater than one year.

GCR Methodology update

In September 2018, GCR updated its Global Master Structured Finance Rating Criteria and in November 2018, GCR updated its Global Credit-Linked Note and Repackaging Vehicle Rating Criteria. Both Criteria are applicable to this Transaction

RATING RATIONALE

The iMpumelelo CP Note Programme 1 is a hybrid Serialised Note Programme that is fully supported by Absa Bank Ltd (the “Guarantor”). The Issuer may issue listed and unlisted Notes which will not be subject to a minimum or maximum maturity. The Programme is registered on the Johannesburg Stock Exchange.

The rating is assigned to the short-term Notes issued under the Serialised Note Programme, although the Series Supplement (Series 1) makes provision for the Issuer to issue Notes with a maturity in excess of 13 months – Medium Term Notes (“MTN”). As such, a separate long-term rating would have to be accorded to MTN. GCR expects to be notified in advance of any MTN issuance.

The aggregate nominal amount of Series 1 Notes outstanding as at 31 January 2019 was R5.4bn. The Arranger advised GCR that the outstanding amount of Series 1 Notes is planned to be increased. The Programme Limit is R10bn.

As at January 2019, the Notes (Commercial Paper) in issuance had an earliest reported maturity date of February 2019 and to a latest reported maturity date of January 2020. None of the Notes in issuance had a maturity in excess of 12 months.

The Series 1 Notes are fully supported by an irrevocable and unconditional guarantee issued by Absa (the “Absa Guarantee”) to both the Series 1 Noteholders and the Issuer. The Absa Guarantee is specific to Series 1 and covers the Series 1 Noteholders (including MTN Noteholders) against any payment obligations of the Issuer towards the Noteholders arising from an Event of Default in terms of the Transaction Documents. As a result, the composition of the asset portfolio is not relevant to GCR’s analysis.

The Absa Guarantee also provides an irrevocable and unconditional guarantee to the Issuer for any and all payment obligations incurred by the Issuer under the Transaction Documents. The Absa Guarantee also covers the Issuer against any Liquidity Shortfalls arising from a payment mismatch at the maturity date of the Notes. There had been no amounts utilised under the Absa Guarantee as at 31 January 2019.

Absa performs several support functions to the Transaction, including Administrator, Dealer, Account Bank, Guarantor and Derivative Counterparty, among others. GCR downgraded Absa’s long-term national scale credit rating to ‘AA(ZA)’ with a Stable Outlook and affirmed its short-term national scale credit rating of ‘A1+(ZA)’ in May 2018.

The short-term rating of the Notes issued under the Programme is fully supported by Absa’s involvement as Guarantor for any repayment due in respect of the Notes. As such, should the short-term credit rating of Absa change, it is likely that the rating of the Notes will also change. GCR noted, in terms of its Counterparty Criteria requirements, the absence of remedial language to seek an alternative guarantor with the Required Credit Rating, should the Guarantor be downgraded below a certain level. No rating sensitivity tests were applied due to the nature of the Transaction being credit linked to the Guarantor.

NATIONAL SCALE RATINGS HISTORY

Asset Class
Initial Rating
Long Term Rating
Short Term Rating
Outlook
ABCP – Series 1
10 March 2016
n.a
A1+(ZA)(sf)
n.a
         
Asset Class
Last Rating
Long Term Rating
Short Term Rating
Outlook
ABCP – Series 1
24 April 2018
n.a
A1+(ZA)(sf)
n.a

ANALYTICAL CONTACTS

Primary Analyst Secondary Analyst
Corné Els Tinashe Mujuru
Senior Structured Finance Analyst Structured Finance Analyst
corneE@globalratings.net tinashem@globalratings.net
+27 11 784 1771 +27 11 784 1771

Committee Chairperson
Yohan Assous
Sector Head: Structured Finance Ratings
yohan@globalratings.net
+27 11 784 1771

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Structured Finance Rating Criteria – Sep ’18;

Global Credit-Linked Note and Repackaging Vehicle Rating Criteria – Nov ’18;

Global Asset Backed Commercial Paper Rating Criteria – Nov ’18;

Global Master Criteria for Rating Banks and Other Financial Institutions – Mar ’17; with reference to Absa Bank Limited’s Credit Rating Report – May ’18.

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

Account Bank A bank where the transaction account is held.
Administrator A transaction appointed agent responsible for the managing of a Conduit or a Special Purpose Vehicle. The responsibilities may include maintaining the bank accounts, making payments and monitoring the transaction performance.
Advance A lending term, to transfer funds from the creditor to the debtor.
Arranger Usually an Investment bank that advises and constructs a transaction and acts as a conduit between the transaction parties: Client, Issuer, Credit Rating Agency, Investors, Legal Counsel and Servicers.
Asset An item with economic value that an entity owns or controls.
Commercial Paper A debt security of short-term nature, less than a year.
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 90 days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.
Derivative A financial instrument that offers a return based on the return of another underlying asset.
Downgrade The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.
Guarantee An undertaking for performance of another’s obligations in event of default.
Guarantor A party that gives the guarantee.
Hybrid A form of security that has characteristics of various types of transaction or product.
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.
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.
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.
Medium Term Notes Debt securities with a tenor ranging from 3 months to 15 years.
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.
Provision An amount set aside for expected losses to be incurred by a creditor.
Repack Rearrangement of securities with the intent to be more attractive for investment. Junior tranches (that have a higher degree of default risk) of a securitisation transactions that have been repackaged into separate debt securities (according to their degree of risk) that utilise credit-enhancement techniques to mitigate the risk. A CDO is created to distribute the prepayment risk amongst different classes of Notes.
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.
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.
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.
Unconditional Not subject to any conditions.
Account Bank A bank where the transaction account is held.
Administrator A transaction appointed agent responsible for the managing of a Conduit or a Special Purpose Vehicle. The responsibilities may include maintaining the bank accounts, making payments and monitoring the transaction performance.
Advance A lending term, to transfer funds from the creditor to the debtor.
Arranger Usually an Investment bank that advises and constructs a transaction and acts as a conduit between the transaction parties: Client, Issuer, Credit Rating Agency, Investors, Legal Counsel and Servicers.
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.
Collateral An asset pledged as security in event of default.
Commercial Paper A debt security of short-term nature, less than a year.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
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.
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.
Debenture A long-term debt instrument issued by either: a company, institution or the government to raise funds.
Debt An obligation to repay a sum of money.
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.
Derivative A financial instrument that offers a return based on the return of another underlying asset.
Downgrade The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.
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.
Guarantee An undertaking for performance of another’s obligations in event of default.
Guarantor A party that gives the guarantee.
Hybrid A form of security that has characteristics of various types of transaction or product.
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.
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.
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.
Medium Term Notes Debt securities with a tenor ranging from 3 months to 15 years.
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.
Obligor 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.
Property Movable or immovable asset.
Provision An amount set aside for expected losses to be incurred by a creditor.
Repack Rearrangement of securities with the intent to be more attractive for investment. Junior tranches (that have a higher degree of default risk) of a securitisation transactions that have been repackaged into separate debt securities (according to their degree of risk) that utilise credit-enhancement techniques to mitigate the risk. A CDO is created to distribute the prepayment risk amongst different classes of Notes.
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.
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.
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.
Unconditional Not subject to any conditions.
Weighted The weight that a single obligation has in relation to the aggregated pool of obligations. For example, a single mortgage principal balance divided by the aggregated mortgage pool principal balance.
Weighted Average An average resulting from the multiplication of each component by a factor reflecting its importance or, relative size to a pool of assets or liabilities.

For a detailed glossary of terms utilised please click here.

SALIENT FEATURES OF ACCORDED RATING

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 information received was considered adequate and has been independently verified where possible.

The rating above was solicited by the Arranger of the Transaction; GCR has been compensated for the provision of the rating.

The information received from the Arranger and other reliable third parties to accord the credit rating included:

  • Monthly Investor Reports from August 2015 to January 2019.

The credit rating has been disclosed to the Arranger.

Leave a Reply

Your email address will not be published. Required fields are marked *



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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright 2019 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.