Johannesburg, 29 April 2016 — Global Credit Ratings (‘GCR’) has accorded final, public long term credit ratings to the following Series 1 Notes (“Series 1”) to be issued (the “New Notes”) by the South African Securitisation Programme (RF) Limited (“SASP” or “SASP Series 1”) on 29 April 2016:
R178.0m, Class A22, stock code ERSA22, interest at 3M Jibar + 1.75%, due 17 May 2019: .……………………. ‘AAA(ZA)(sf)’, Outlook Stable.
R16.0m, Class B5, stock code ERS3B5, interest at 3M Jibar + 2.15%, due 17 May 2019: ………………..……………. ‘A(ZA)(sf)’, Outlook Stable.
R6.0m, Class C5, stock code ERS3C5, interest at 3M Jibar + 3.15%, due 17 May 2019:……………………………. ‘BBB(ZA)(sf)’, Outlook Stable.
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:
R189.0m, Class A15, stock code ERSA15, interest at 3M Jibar + 1.50%, due 17 August 2017: .…………………. ‘AAA(ZA)(sf)’, Outlook Stable.
R180.0m, Class A16, stock code ERSA16, interest at 3M Jibar + 1.14%, due 17 August 2016: ………………….. ‘AAA(ZA)(sf)’, Outlook Stable.
R182.0m, Class A17, stock code ERSA17, interest at 3M Jibar + 1.39%, due 17 August 2018: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R200.0m, Class A18, stock code ERSA18, interest at 3M Jibar + 1.15%, due 17 August 2017: ..…………….….. ‘AAA(ZA)(sf)’, Outlook Stable.
R50.0m, Class A19, stock code ERSA19, interest at 3M Jibar + 1.05%, due 17 August 2016: ..………………….. ‘AAA(ZA)(sf)’, Outlook Stable.
R177.0m, Class A20, stock code ERSA20, interest at 3M Jibar + 1.50%, due 17 August 2018: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R155.0m, Class A21, stock code ERSA21, interest at 3M Jibar + 1.84%, due 17 August 2020: ..………………… ‘AAA(ZA)(sf)’, Outlook Stable.
R99.0m, Class B4, stock code ERS3B4, interest at 3M Jibar + 1.85%, due 17 August 2019: ..……………………..…. ‘A(ZA)(sf)’, Outlook Stable.
R35.0m, Class C4, stock code ERS3C4, interest at 3M Jibar + 2.35%, due 17 August 2019: ..………………….…. ‘BBB(ZA)(sf)’, Outlook Stable.
RATING RATIONALE
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 Class A Notes, Class B Notes and Class C Notes (collectively the “Existing” and “New Notes” are referred to as the “Series 1 Notes”) will be issued under SASP Series 1 (the “Transaction”). SASP has issued notes under another series, SASP Series 2, whose assets (the “Series 2 Assets”) and liabilities are completely segregated from the assets of SASP Series 1 (the “Series 1 Assets”). The notes issued under SASP Series 2 are also rated by GCR.
GCR reviewed the performance of leases originated by Sasfin for the period from Q2 2002 to Q3 2015 and determined default and recovery base cases in line with GCR’s Global Consumer ABS Criteria. GCR was also provided with the latest Asset Pool cut as at 31 March 2016, encompassing the leases to be funded by the issuance of the New Notes. 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. GCR relied on a cash flow model to determine if the cash flow from the securitised portfolio would be sufficient to service the Transaction at all the relevant rating levels. For more information, please read the South African Securitisation Programme (RF) Limited Series 1 New Issuance Report published 18 December 2015 and the South African Securitisation Programme (RF) Limited Series 1 Tap Issuance Report published on 29 April 2016.
The final, public credit ratings accorded to the ‘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.
RATINGS HISTORY
ANALYTICAL CONTACTS
Primary Analyst
Mark Vrdoljak
Credit Analyst
+27 11 784 1771
Committee Chairperson
Emma-Jane Fulcher
Sector Head: Structured Finance Ratings
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’16; and
Global Consumer Asset Backed Securitisation Rating Criteria – Apr ’15.
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
| Agent | An agreement where one party (agent) concludes a juristic act on behalf of the other (principal). The agent undertakes to perform a task or mandate on behalf of the principal. |
| Agreement | A negotiated and usually legally enforceable understanding between two or more legally competent parties. |
| arranger | Usually an Investment bank that advises and constructs a transaction and acts as a conduit between the transaction parties: Client, Issuer, Credit Rating Agency, Investors, Legal Counsel and Servicers. |
| 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. |
| Claim | A formal request or demand. |
| Conduit | A commercial lending entity that is established to purchase assets to securitise. |
| 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 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. |
| 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. |
| Credit Rating Agency | An entity that provides credit rating services. |
| Credit Risk | The probability or likelihood that a borrower or issuer will not meet its debt obligations. Credit Risk can further be separated between current credit risk (immediate) and potential credit risk (deferred). |
| Creditor | A credit provider that is owed debt obligations by a debtor. |
| Creditworthiness | An assessment of a debtor’s ability to meet debt obligations. |
| debt | An obligation to repay a sum of money. |
| Debtor | The party indebted or the person making repayments for its borrowings. |
| 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. |
| Enforceable | To make sure people do what is required by a law or rule et cetera. |
| Excess Spread | The net weighted average interest rate receivable on a pool of assets being greater than the weighted average interest rate payable for the debt securities. |
| Floating Rate Notes | Debt securities that have a periodic interest rate reset in relation to the reference rate, i.e. JIBAR. |
| Guarantee | An undertaking for performance of another’s obligations in event of default. |
| Hedging | A financial risk management process or function to take a market position to protect against an eventuality. Taking an offsetting position in addition to an existing position. The correlation between the existing and offsetting position is negative. |
| Issuer | The party indebted or the person making repayments for its borrowings. |
| JIBAR | Johannesburg Interbank Agreed Rate. A reference rate. |
| 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. |
| Legal Opinion | An opinion regarding the validity and enforceable of a transaction’s legal documents. |
| Lender | A credit provider that is owed debt obligations by a debtor. |
| Lessee | The party that enjoys temporary use of a corporeal thing. |
| Lessor | The owner or agent that acts on behalf of the owner of property that grants the temporary use of a corporeal thing. |
| Liability | All financial claims, debts or potential losses incurred by an individual or an organisation. |
| 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. A lien outranks all other forms of security claims. A lien arises by operation of law and not as agreement between parties. There are three types of liens: 1.) Storage or salvation of property; 2.) Improvement of property; and 3.) Contractual debt. |
| Liquidity | The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity. |
| Liquidity Risk | The risk that a company may not be able to meet its financial obligations or other operational cash requirements due to an inability to timeously realise cash from its assets. Regarding securities, the risk that a financial instrument cannot be traded at its market price due to the size, structure or efficiency of the market. |
| 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. |
| Loss | A tangible or intangible, financial or non-financial loss of economic value. |
| Market | An assessment of the property value, with the value being compared to similar properties in the area. |
| Obligation | The title given to the legal relationship that exists between parties to an agreement when they acquire personal rights against each other for entitlement to perform. |
| Obligor | The party indebted or the person making repayments for its borrowings. |
| Offset | A right (Right of Offset) to set liabilities against assets in any dispute over claims. |
| Principal | The total amount borrowed or lent, e.g. the face value of a bond, excluding interest. |
| Property | Movable or immovable asset. |
| Provision | An amount set aside for expected losses to be incurred by a creditor. |
| Ranking | A priority applied to obligations in order of seniority. |
| Rated Securities | Debt securities that have been accorded a credit rating. |
| 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). |
| 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. |
| Redemption | The repurchase of a bond at maturity by the issuer. |
| Reference Rate | A rate that is the basis of the calculation such as JIBAR. |
| 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. |
| Reserve Fund | A funded account available for use by a Special Purpose Vehicle for one or more specified purposes. A reserve fund is often used as a form of credit enhancement. Typically accumulated over time, through excess cash flows. |
| Risk Management | Process of identifying and monitoring business risks in a manner that offers a risk/return relationship that is acceptable to an entity’s operating philosophy. |
| 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. |
| 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. |
| Security Package | Security offered to Noteholders for debt securities issued that should increase the recoveries in an event 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. |
| Special Purpose Vehicle | An entity that is created to fulfill specific objectives. Normally insolvency remote and created to isolate financial risk. |
| Spread | The interest rate that is paid in addition to the reference rate for debt securities. |
| 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. |
| Subordination | The prioritising of the payment of interest and principal payments to tranches (senior, junior etc. Senior tranches are paid before junior tranches. |
| 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. |
| Valuation | An assessment of the property value, with the value being compared to similar properties in the area. |
| Weighted | The weight that a single obligation has in relation to the aggregated pool of obligations. For example, a single mortgage principal balance divided by the aggregated mortgage pool principal balance. |
| 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 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 Issuer and 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 Issuer and the Arranger with no contestation of the rating.
The information received from the Arranger and other reliable third parties to accord the credit ratings included:
The information received from the Arranger and other reliable third parties to accord the credit ratings included the portfolio performance data relating to the underlying equipment lease portfolio covering the period June 2002 – August 2015; an overview of the available lease portfolio that will be acquired by the Issuer at Transaction Closing as per 31 March 2016; an audit report relating to the securitised portfolio; the Issuer’s audited annual financial statements for the year ending 30 June 2015; signed transaction documents. GCR received the final of the transaction legal opinions prepared by South African transaction legal counsel, Edward Nathan Sonnenbergs. The outstanding transaction documents and the signed opinions are expected to be received at a maximum of one week after Transaction Closing.