Johannesburg, 31 August 2017 — Global Credit Ratings (“GCR”) has accorded final, public long-term credit ratings to the following Notes issued (the “New Notes”) under Series 1 of the South African Securitisation Programme (RF) Limited (“SASP” or “SASP Series 1”) on 17 August 2017:
R108.0m, Class A24, stock code ERSA24, interest at 3M Jibar + 1.50%, due 17 November 2025: .………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R281.0m, Class A25, stock code ERSA25, interest at 3M Jibar + 1.80%, due 17 November 2025: .…………………. ‘AAA(ZA)(sf)’, Outlook Stable.
The proceeds of the Class A24 and Class A25 Notes were used to refinance the Class A15 and Class A18 notes upon maturity on 17 August 2017.
Concurrently, GCR has affirmed the final, public long-term credit ratings and rating outlooks accorded to the following Series 1 Notes (the “Existing Notes”) issued by SASP:
R182.0m, Class A17, stock code ERSA17, interest at 3M Jibar + 1.39%, due 17 November 2025: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R177.0m, Class A20, stock code ERSA20, interest at 3M Jibar + 1.50%, due 17 November 2025: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R155.0m, Class A21, stock code ERSA21, interest at 3M Jibar + 1.84%, due 17 November 2025: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R178.0m, Class A22, stock code ERSA22, interest at 3M Jibar + 1.75%, due 17 November 2025: ..……….……….. ‘AAA(ZA)(sf)’, Outlook Stable.
R230.0m, Class A23, stock code ERSA23, interest at 3M Jibar + 1.75%, due 17 November 2025: ..……….……….. ‘AAA(ZA)(sf)’, Outlook Stable.
R99.0m, Class B4, stock code ERS3B4, interest at 3M Jibar + 1.85%, due 17 November 2025: ..………………………… ‘A(ZA)(sf)’, Outlook Stable.
R16.0m, Class B5, stock code ERS3B5, interest at 3M Jibar + 2.15%, due 17 November 2025: ..…………..……………. ‘A(ZA)(sf)’, Outlook Stable.
R35.0m, Class C4, stock code ERS3C4, interest at 3M Jibar + 2.35%, due 17 November 2025: ..…………..…….….. ‘BBB(ZA)(sf)’, Outlook Stable.
R6.0m, Class C5, stock code ERS3C5, interest at 3M Jibar + 3.15%, due 17 November 2025: ……..……..……….….. ‘BBB(ZA)(sf)’, Outlook Stable.
SASP Series 1 is a public securitisation of rental and lease financed assets originated by Sasfin Bank Limited (“Sasfin”) through Sunlyn Rentals Proprietary Limited and other entities approved by Sasfin, which include disclosed suppliers and super non-disclosed suppliers (“SNDs”). The programme allows the Issuer to issue individual tranches of notes in separate series; the liabilities and assets of each series will be completely segregated and the secured creditors of one series will not have recourse to the assets of any other series. The proceeds from the issuance of the Class A Notes, Class B Notes and Class C Notes (collectively the “Existing Notes” and “New Notes” are referred to as the “Series 1 Notes”) were used to fund the purchase of the SASP Series 1 portfolio of equipment lease receivables, as well as the associated equipment (the “Series 1 Assets”).
GCR reviewed the performance of leases originated by Sasfin for the period from Q2 2002 to Q2 2017 and performed several scenario analyses in order to determine the base case default and recovery rates, in line with GCR’s Global Consumer ABS Criteria. GCR was also provided with the latest Asset Pool cut as at 31 May 2017. GCR then determined the appropriate stress levels for each rating band and tested the credit enhancement provided to each tranche of the Series 1 Notes for the respective rating levels. In analysing the new data, GCR noted that there was no covenant, stop trigger, amortisation event or performance test breaches since the last surveillance. GCR did note a slight deterioration in the extrapolated cumulative default data, albeit this was below the conservative cumulative default base case applied. GCR’s analysis of cumulative recoveries led to a revision in the cumulative recovery base case to account for recoveries in a stressed scenario related to leases outside the Common Monetary Area and leases with non-specified or non-scheduled equipment. Furthermore, GCR noted the low levels of Fixed Rate Leases in the securitised asset pool (0.16% at 30 June 2017). Should there be a significant change in the proportion of fixed rate leases included in the pool, GCR will assess the sufficiency of hedges in place, the ratings of the hedging counterparties and the impact of the fixed rate leases on the ratings of the Notes in issue.
GCR then relied on a cash flow model to determine if the cash flow from the securitised asset portfolio would be sufficient to service the payments under the Series 1 Notes in all the relevant rating scenarios. For more information, please read the South African Securitisation Programme (RF) Limited Series 1 New-Issuance Report to be published on 31 August 2017.
The final, public credit ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal (by the Final Maturity Date of the Notes in a Post-Enforcement scenario), whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal (by the Final Maturity Date of the Notes in a Post-Enforcement scenario). The ratings exclude, amongst others, an assessment of the ability of the Issuer to pay either any (early repayment) penalties or default interest rate penalties.
Primary Analyst Secondary Analyst
Mark Vrdoljak Tinashe Mujuru
Senior Structured Finance Analyst 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 Master Structured Finance Rating Criteria, updated Feb ’17.
- Global Consumer Asset Backed Securitisation (“ABS”) Rating Criteria, updated May ’17.
- Global Master Criteria for Rating Banks and Other Financial Institutions, updated Mar ’17.
- SASP 1 New Issuance Report – Aug ’16.
- SASP 1 Surveillance Report – Jan ’17.
- GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – May ’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.
|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 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.|
|Creditor||A credit provider that is owed debt obligations by a debtor.|
|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.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Lease||Agreement or temporary use and enjoyment of a corporeal thing (movable or immovable property) the whole or part thereof for rent. The essential elements of a contract of lease are: 1.) Undertaking of lessor to give the lessee the use and enjoyment of something; 2.) Agreement between the lessor and lessee that the lessee’s right to use and enjoyment is temporary; and 3.) Lessee’s undertaking to pay a sum or rent.|
|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.|
|Proceeds||Funds from issuance of debt securities or sale of assets.|
|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).|
|Receivables||General term for economic benefit derived from an asset.|
|Recourse||A source of help in a difficult situation.|
|Recovery||The action or process of regaining possession or control of something lost. To recoup losses.|
|Refinance||The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.|
|Rent||Payment from a lessee to the lessor for the temporary use of an asset.|
|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.|
|Secured Creditor||A creditor that has specific assets pledged as collateral that will receive the proceeds in the event of default.|
|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.|
|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.|
|Timely Payment||The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.|
|Tranche||In a structured finance, a slice or portion of debt securities offered that is structured or grouped to resemble the same degree of risk associated with the underlying asset or with a similar degree of risk. A junior tranche has a higher degree of default risk than a senior tranche.|
|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.|
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 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 ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
The credit ratings have been disclosed to the Issuer and the Arranger with no contestation of the ratings.
The information received from the Arranger (Sasfin) and other reliable third parties to accord the credit ratings included:
- Static default data for the period between Q2 2002 and Q2 2017.
- Static recoveries data for the period between Q2 2002 and Q2 2017.
- Monthly prepayment rates for the period between August 2005 and May 2017.
- An overview of the cut off pool as at 31 May 2017.
- An overview of the expected monthly senior costs for the Issuer as at 31 May 2017.
- Monthly reporting packs for the period November 2012 to June 2017.
- Audited financial statements relating to the Issuer per 30 June 2016 and unaudited interim results for the 6 months ended 31 December 2016.
- Legal Opinion prepared by ENS dated 17 August 2017.
- Tax Opinion confirmation letter by Grant Thornton dated 29 August 2017.
- Signed Transaction documents relating to the New and Existing Notes.
- SASP Directors Dividend Resolution with applied Solvency and Liquidity Tests February 2017.