Announcements

Nyati Securitisation 1 (RF) Limited – Ratings Affirmed with Negative Outlook

Johannesburg, 17 October 2014 — Global Credit Rating Co. (Pty) Ltd (‘GCR’) has affirmed the final, public Long Term credit ratings of the securities mentioned below (the ‘Class A Notes’ and the ‘Class B Notes’) and has accorded a Negative Outlook to these rated securities:

R262,000,000 Class A Notes, interest at 3M JIBAR + 2.70%, due 28 May 2020 – ‘A(ZA)(sf)’, Negative Outlook.

R35,000,000 Class B Notes, interest at 3M JIBAR + 5.00%, due 28 May 2020 – ‘BBB(ZA)(sf)’, Negative Outlook.

The Negative Outlook is reflective of GCR’s view on the unsecured loan market. Nyati Securitisation (the ‘Transaction’) is a securitisation of personal loans originated by Real People (Pty) Limited through its merchant distribution channel and advanced to debtors residing in South Africa. The final, public credit ratings accorded to the Class A Notes and Class B Notes relate to timely payment of interest and ultimate repayment 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 accorded a Negative Outlook to the rated securities due to GCR’s view on the unsecured loan market. The rating action follows a review of the Transaction’s performance over the period 1 February 2014 to 31 July 2014 (the ‘Review Period’). The Transaction performed satisfactorily over the Review Period. The Transaction is currently still in the Revolving Period which will end in November 2014, following which the quarterly repayment of the notes issued under the Transaction will commence. Cash generated by the Transaction amounted to R152.4m over the Review Period, with the majority of the cash used to purchase additional loans. The loan portfolio grew from R379.2m as at 31 January 2014 to R416.7m as at 31 July 2014, whilst the number of loan contracts increased from 24,030 as at 31 January 2014 to 28,316 as at 31 July 2014. The Issuer purchased R51.8m (excluding unearned fees: R49.5) worth of loans on 1 August 2014. The Loan Closing Balance has therefore increased by approximately the same amount (excluding repayment, interest and fees). The total gross NPLs in the portfolio grew from 8.64% as at 31 July 2013 to 22.62% as at 31 January 2014 to 34.82% as at 31 July 2014. No portfolio covenants were breached over the Review Period. The weighted average original term of the portfolio was 37.15 months as at 31 July 2014 (covenant < 39 months). The weighted average interest rate of the portfolio was 30.71% as at 31 July 2014 (covenant ≥ 30.65%). None of the portfolio concentration limits relating to the Top 50 or Top 10 loans were breached over the review period. It is expected that the Top 10 loans will be the first covenant to be breached, all things being equal, and, will therefore coincide with the end of the Revolving Period which is the first day following the sixth payment date (28 November 2014) after the first payment date (28 May 2013). The Top 10 loans covenant breach will result in a stop purchase event. No Amortisation Event or Subordinated Capital Suspension Event occurred during the Review Period. The Cash Reserve was maintained at the required level and all the required loan portfolio top-ups were met over the Review Period. The Issuer paid a R9m dividend in September 2014.

The Seller / Servicer is a wholly owned subsidiary of the Real People Investment Holdings Group (‘RPIH’). GCR met with RPIH in September 2014. RPIH’s Long Term and Short Term ratings of ‘BB+(ZA)’ and B(ZA)’ respectively, were placed on Negative Outlook by GCR on 7 October 2014 following a deterioration of RPIH’s loan book. The rating action on RPIH did not affect the ratings of the Notes as the performance of RPIH’s home finance loans which also make up Nyati Securitisation’s loan portfolio remained well within expectations. RPIH currently has a Primary Servicer Quality Rating of ‘SQ2(ZA)’ and a Special Servicer Quality Rating of ‘SQ2+(ZA)’ with a Negative Outlook. GCR reviewed the Primary and Special Servicer Quality Rating on 9 October 2014 and there were no changes to the rating accorded. This rating is reflective of RPIH’s ability to service the Transaction. RPIH displayed a cutback in the number of loans originated. Except for this, there have been no other changes made to their processes and procedures in respect of collection and servicing of the portfolio. RPIH displayed a renewed focus on liquidity management. GCR analysed the Transaction by applying its Global Structured Finance Rating Criteria and a tailored stressed collections approach. For more information on the Transaction please read the Nyati Securitisation Surveillance Report published on 17 October 2014.

RATINGS HISTORY

Stock code

Initial Rating

Long Term Rating

Short Term Rating

Outlook

NYT101

24 May 2013

A(ZA)(sf)

n.a

Stable

NYT102

24 May 2013

BBB(ZA)(sf)

n.a

Stable

Stock code

Previous Rating

Long Term Rating

Short Term Rating

Outlook

NYT101

19 May 2014

A(ZA)(sf)

n.a

Stable

NYT102

19 May 2014

BBB(ZA)(sf)

n.a

Stable

ANALYTICAL CONTACTS

Corné Els
Structured Finance Analyst
CorneE@globalratings.net
+27 11 784 1771

Committee Chairperson
Emma-Jane Fulcher
Head: Structured Finance Ratings
fulcher@globalratings.net
+27 11 784 1771

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Structured Finance Rating Criteria – Feb ’14 and a tailored stressed collections approach
Nyati Securitisation 1 (RF) Limited Surveillance Report – May ’14
Real People Investment Holdings Ltd Financial Institution Report – Jun ’14 and subsequent rating announcement.
Real People Investment Holdings Limited Servicer Quality Report – Jun ’14 and subsequent servicer rating announcement.

RATING LIMITATIONS AND DISCLAIMERS

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://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.NET/RATINGS-INFO. 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 THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

SALIENT FEATURES OF ACCORDED RATINGS

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 credit rating/s has been disclosed to the RPIH with a contestation of the rating accorded for the Class B Notes surveillance rating panel held on 10 October 2014. The RPIH subsequently provided additional information that pertain to the assets sold to the Issuer on 1 August 2014 to the value of R51,884,276 (excluding unearned fees: R49,497,277). GCR thereafter reviewed the transaction based on the new and existing information provided and caused GCR to review the rating accorded to the Class B Notes.

The information received from the Arranger and other reliable third parties to accord the credit ratings included the signed executed transaction documents together with the relevant signed legal opinion; the Issuer’s management accounts for the period May 2013 to January 2014 and quarterly waterfall reports for the quarters ending 28 August 2013, 28 November 2013, 28 February 2014, 28 May 2014 and 28 August 2014.

The rating/s above were solicited by the Issuer and Arranger of the Transaction; GCR has been compensated for the provision of the ratings.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY

Amortisation

The gradual reduction of an obligation over time as the net result of repayments, interest and fees.

Credit Rating

A rating accorded to the performance of either ultimate or timely payment of obligations.

Credit Rating Agency

A party that provides an opinion on the credit quality of assets, debt securities and companies.

Credit Risk

The probability or likelihood that a borrower will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred).

JIBAR

Johannesburg Interbank Agreed Rate. A reference rate.

Legal Opinion

An opinion regarding the validity and enforceable of a transaction’s legal documents.

Lien

A right of retention of someone else’s property due to expensed money or labour on property acquires a lien until payment is made.

Liquidity Risk

The risk that a financial instrument cannot be traded on its market price due to the size of the market.

Long Term Rating

A credit rating based on the opinion of the ability to repay long term (more than a year) obligations.

Property

Movable or immovable asset.

Rated Securities

Debt securities that have been accorded a credit rating.

Reference Rate

A rate that is the basis of the calculation such as JIBAR.

Revolving period

See Period (Pre-enforcement Period).

Short Term Rating

A credit rating based on the opinion of the ability to honour short term (less than a year) obligations.

Stock Code

A unique code allocated to a publicly listed security.

Stop Purchase Event

An event caused by deteriorating performance of a transaction or environmental changes that would stop the purchasing of new assets into the transaction.

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.

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.

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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.

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