Announcements

Mmela Mobility Finance (RF) Limited – Ratings Placed on Rating Watch

Johannesburg, 15 December 2017 — Global Credit Ratings (“GCR”) has placed the following final, public long-term credit ratings accorded to the following Notes issued by Mmela Mobility Finance (RF) Ltd (“the Issuer” and “the Transaction”) on Rating Watch:

Secured Class A Notes, stock code MMF101;
R356,000,000;
AAA(ZA)(sf)
Rating Watch;
Secured Class B Notes, stock code MMF201;
R52,000,000;
A-(ZA)(sf)
Rating Watch; and
Secured Class C Notes, stock code MMF301;
R19,000,000;
BB-(ZA)(sf)
Rating Watch.

The Transaction has Secured 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.

RATING RATIONALE

GCR has been advised by the Administrator, Redinkcapital (Pty) Ltd, and the Security SPV of the Transaction that a Servicer Default notice has been served to the Servicer, MFS, on 1 December 2017. The Servicer disputes the notice. GCR met with the Administrator, Servicer, Security SPV, Back-up Servicer (CSS Credit Solutions Services (Pty) Ltd) to assess the potential impact of the Servicer replacement and such dispute on the performance of the Transaction. To date, the transition to the Back-up Servicer was performed without disruption of cash flows.

GCR noted the decrease in the available excess spread in the Transaction. This is due to fund-asset mismatch caused by long delivery lead time of between 90 and 120 days per vehicle. As a result, cash collections from the asset portfolio are left dormant in the structure as opposed to being reinvested in additional instalment sale agreements (“ISAs”) to mitigate any negative carry. Should the excess spread be negative (an Event of Default), GCR will review the Transaction and may take rating action. This issue is not related to the delivery of a Servicer Default notice.

GCR has been advised that the 15 December 2017 interest payments on the Notes have been made.

GCR hereby states that it holds no view, not does it participate in any manner whatsoever, on the validity of the abovementioned dispute. However, GCR will continue to monitor the performance of 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, and communicate any action on or before 15 June 2018. The Transaction was scheduled to be reviewed by 19 January 2018.

RATINGS HISTORY

Security class
Stock code
Initial and Last Rating
Long-term Rating
Short-term Rating
Outlook
Secured Class A Notes
MMF101
14 July 2017
AAA(ZA)(sf)
n.a
Stable
Secured Class B Notes
MMF201
14 July 2017
A-(ZA)(sf)
n.a
Stable
Secured Class C Notes
MMF301
14 July 2017
BB-(ZA)(sf)
n.a
Stable

ANALYTICAL CONTACTS

Corné Els

Senior Structured Finance Analyst

+27 11 784 1771

CorneE@globalratings.net

Committee Chairperson

Yohan Assous

Sector Head: Structured Finance Ratings

+27 11 784 1771

fulcher@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Structured Finance Rating Criteria – Feb ’17,

Consumer Asset Backed Securitisation Rating Criteria – May ’17,

Global Master Criteria for Rating Banks and Other Financial Institutions – Mar ’17,

Mmela Mobility Finance (RF) Limited New Issuance Report – Jul ’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

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.
Asset An item with economic value that an entity owns or controls.
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.
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.
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.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Rating Outlook A Rating outlook indicates the potential direction of a rated entity’s rating over the medium term, typically one to two years. An outlook may be defined as: ‘Stable’ (nothing to suggest that the rating will change), ‘Positive’ (the rating symbol may be raised), ‘Negative’ (the rating symbol may be lowered) or ‘Evolving’ (the rating symbol may be raised or lowered).
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.
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.
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.
Senior A security that has a higher repayment priority than junior securities.
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 with no contestation of the ratings.

GCR has received, amongst others, Notice from the Security SPV, Mmela Mobility Finance Security SPV (RF) (Pty) Ltd, to the Servicer, Mmela Financial Services (Pty) Ltd of a Service Default, and related correspondence between the Transaction parties.

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.

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