Johannesburg, 14 December 2017 — Global Credit Ratings (“GCR”) has affirmed the final, public short-term credit rating of ‘A1(ZA)(sf)’ accorded to the notes (the “Notes”) issued or to be issued by iNkotha Investments (RF) Limited (“iNkotha” or the “Issuer”) from time to time under its R10bn domestic call bond fund programme (the “Transaction” or the “Programme”). Concurrently, GCR has affirmed the final, public short-term senior unsecured credit rating of ‘A1(ZA)’ accorded to the Issuer.
The final rating accorded to the Notes relates to timely payment of interest and principal.
The Issuer is a Rand Merchant Bank managed structured funding vehicle that advances rand denominated overnight call loans to South African corporates and South African subsidiaries/branches of international corporates (the “Obligors”). In terms of the Programme, the Issuer may also purchase rand denominated call bonds with a tailored call/put mechanism attached.
GCR performs an annual surveillance on the Programme and is provided with monthly investor reports for the Transaction in order to monitor the weighted average credit rating (“WACR”) of the portfolio. No covenants were breached over the review period (January 2017 to November 2017). GCR developed a rating factor model which uses the long-term ratings of the Obligors as an input and translates these ratings into a WACR for the portfolio as a whole. The WACR is subsequently mapped to a short-term rating which is applicable to the Notes and the Issuer. The Administrator runs the model daily to ensure that the short-term ratings applicable to iNkotha and the Notes do not drop below ‘A1(ZA)’ and ‘A1(ZA)(sf)’ respectively. The WACR of the portfolio has been maintained at a level commensurate with a short-term rating of ‘A1(ZA)’ since transaction closing.
For more information on the Transaction, please refer to the iNkotha Investments (RF) Limited – Surveillance Report, to be published on 14 December 2017. GCR analysed the Transaction by applying its Global Structured Finance Rating Criteria (Feb’17); its Global Master Criteria for Rating Corporate Entities (Feb’17); its Global Master Criteria for Rating Banks and Other Financial Institutions (Mar’17); FirstRand Bank Limited Rating Report (Nov’17); with reference to its iNkotha Investments (RF) Limited New-Issuance Report (Nov’10); and its iNkotha Surveillance Report (Dec’16).
|Primary Analyst||Secondary Analyst|
|Tinashe Mujuru||Corne Els|
|Structured Finance Analyst||Senior Structured Finance Analyst|
|+27 11 784 1771||+27 11 784 1771|
|Sector Head: Structured Finance Ratings|
|+27 11 784 1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
- Global Structured Finance Rating Criteria (Feb’17);
- Global Master Criteria for Rating Corporate Entities (Feb’17);
- Global Master Criteria for Rating Banks and Other Financial Institutions (Mar’17);
- FirstRand Bank Limited Rating Report (Nov’17);
- iNkotha Investments (RF) Limited New-Issuance Report (Nov’10); and
- iNkotha Investments (RF) Limited Surveillance Report (Dec’16).
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.
|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.|
|Bond||A long term debt instrument issued by either: a company, institution or the government to raise funds.|
|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 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.|
|Creditor||A credit provider that is owed debt obligations by a debtor.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|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.|
|Obligor||The party indebted or the person making repayments for its borrowings.|
|Recourse||A source of help in a difficult situation.|
|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.|
|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.|
|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.|
|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.|
SALIENT FEATURES 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 Issuer and the Administrator 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 credit ratings have been disclosed to the Issuer and the Arranger with no contestation of the ratings.
The information received from the Administrator and other reliable third parties to accord the credit ratings includes:
- Monthly investor reports for the period between April 2010 and October 2017;
- The audited financial statements of the Issuer for the year ended 30 June 2017; and
- Satisfactory copies of all executed Transaction documents and the legal opinion.
The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.