Johannesburg, 14 December 2018 — Global Credit Ratings (“GCR”) has affirmed the final, public long-term credit ratings of the following Notes issued by Mmela Mobility Finance (RF) Ltd (“the Issuer” or “the Transaction”) and maintained the Rating Watch:
● Secured Class A Notes, stock code MMF101; R68,751,828; BBB-(ZA)(sf) Rating Watch;
● Secured Class B Notes, stock code MMF201; R33,733,021; BB(ZA)(sf) Rating Watch; and
● Secured Class C Notes, stock code MMF301; R12,325,527; B-(ZA)(sf) Rating Watch.
The Transaction has Class D Notes of R8,000,000 that are unrated and held by Mmela Financial Services (Pty) Ltd (“MFS”).
The final, public credit ratings accorded to the Secured Class A Notes relate to timely payment of interest and ultimate payment of principal, whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
GCR was advised that there have been no changes to the standing and roles of the various Transaction parties under the Transaction since the Ratings Announcement released by GCR on 18 July 2018 to date. GCR understands that there have been no further Noteholders’ meetings, nor any resolutions passed, since the meeting held on 12 July 2018. Furthermore, GCR has been informed that the handover of the accounts in arrears to CSS Credit Solutions Services (Pty) Ltd (“CSS”) has not taken place as yet, nor has any revised Servicing Agreement been concluded.
The Issuer continues to repay interest and principal on the Class A Notes on a monthly basis whist interest are deferred on the subordinated Notes. At 15 November 2018 the Issuer repaid a total of 71.77% of original issued Notes.
At September 2018, the Issuer reported 6.89% (6.75% at May 2018) or R9.7m of accounts in arrears. Also at September 2018, there were R2.2m of accounts in Non-Performing Loan (“NPL”) status reported or 1.57% of the outstanding assets. This translates to NPLs of 0.51% of the original pool of assets. The initial modelled base case cumulative default rate, that, unlike reported defaults, includes recoveries, is 3.66%.
GCR reassessed the Transaction under its updated Global Master Structured Finance Rating Criteria and Global Consumer Asset Backed Securitisation Rating Criteria. For the purpose of remodelling the transaction, GCR adjusted the initial base by a factor of 1.05 times, resulting in a revised base case default rate of 3.84%, to account for inherent additional risk associated with the Servicer in its modelling of defaults.
The revised base case default rate was applied to the existing performing (non-arrears) portfolio, and stressed according to the various rating scenarios. A default rate increased by 1.25 times was applied to the part of the existing portfolio in arrears of up to three months.
GCR retained the base case recovery rate of 54.41% in its modelling.
Although the ratings of the Class A Notes and Class B Notes, under the updated criteria, pass at levels commensurate with those accorded at inception of the transaction, GCR maintained the rating cap applied during the previous rating action given the heightened operational risks implied by the maintenance of the status quo regarding the Transaction’s servicing arrangement between the parties, and, in particular, the concern that, should MFS no longer be in existence, the absence of a fluid transition to a back-up servicer may cause a cash flow disruption in the transaction.
Since the last review, GCR has communicated with the various parties to the transaction, being MFS, the Administrator and the Issuer.
GCR will continue to monitor the Transaction insofar as it relates to timely payment of interest and ultimate payment of principal on the Secured Class A Notes and the ultimate payment of interest and ultimate payment of principal of the other rated securities.
|Secured Class A Notes|
|Secured Class B Notes|
|Secured Class C Notes|
|Secured Class A Notes|
|Secured Class B Notes|
|Secured Class C Notes|
Senior Structured Finance Analyst
+27 11 784 1771
+27 11 784 1771
Structured Finance Analyst
Sector Head: Structured Finance Ratings
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Structured Finance Rating Criteria, updated Sep ’18,
Global Consumer Asset Backed Securitisation (ABS) Rating Criteria, updated Sep ’18,
Global Master Criteria for Rating Banks and Other Financial Institutions – Mar ’17,
Mmela Mobility Finance (RF) Limited Surveillance Report – Jul ’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.
|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.|
|Agreement||A negotiated and usually legally enforceable understanding between two or more legally competent parties.|
|Arrears||General term for non-performing obligations, i.e. obligations that are overdue.|
|Asset||An item with economic value that an entity owns or controls.|
|Cash Flow||A financial term for monetary changes in operations, investing and financing 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 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.|
|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.|
|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.|
|Noteholder||Investor of capital market securities.|
|Performing||An obligation that performs according to its contractual obligations.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|Rated Securities||Debt securities that have been accorded a credit rating.|
|Rating Watch||Indicates that a rating is under review for possible change in the short term and the movement may be either positive or negative.|
|Recovery||The action or process of regaining possession or control of something lost. To recoup losses.|
|Release||An agreement between the creditor and debtor, in terms of which the creditor release the debtor from its obligations.|
|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.|
|Securities||Various instruments used in the capital market to raise funds.|
|Securitisation||Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.|
|Servicer||A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.|
|Servicing||The calculation of interest and repayments, collection of repayments, advancing of loans, foreclose procedures, maintaining records and seeing that the proceeds of each loan are passed on to the respective party.|
|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.|
|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.|
|Ultimate Payment||A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.|
For a detailed glossary of terms please click here.
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings were 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 ratings document.
The Arranger, Administrator, Issuer and Servicer 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 Arranger, Administrator, Issuer and Servicer.
GCR has received, amongst others:
The ratings above were solicited by, or on behalf of the rated client, and therefore, GCR has been compensated for the provision of the ratings.
Mmela Mobility Finance (RF) Limited – Ratings Affirmed, Rating Watch Maintained