Johannesburg, 14 July 2016 — Global Credit Ratings (‘GCR’) has affirmed the final, public long term credit ratings accorded to the following securities issued by the South African Securitisation Programme (RF) Limited Series 1 (“SASP Series 1”):
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.
R178.0m, Class A22, stock code ERSA22, interest at 3M Jibar + 1.75%, due 17 May 2019: ………………………. ‘AAA(ZA)(sf)’, Outlook Stable.
GCR has also affirmed the final, public long term credit ratings accorded to the following securities issued by the South African Securitisation Programme (RF) Limited Series 2 (“SASP Series 2”):
R280.0m, Class A1, stock code LRFA1, interest at 3M Jibar + 1.65%, due 20 November 2016: .…………………. ‘AA(ZA)(sf)’, Outlook Stable.
SASP Series 1 & 2 are public securitisations 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 SASP Series 2 assets and liabilities are completely segregated from the assets of SASP Series 1.
GCR reviewed the Transaction following the appointment of Sasfin (BBB+(ZA) Stable/A1-(ZA) Stable, accorded May 2016 by GCR) in conjunction with the current Series Account Bank Nedbank Limited (“Nedbank”, BBB- Negative/A-3 Negative (international scale), affirmed May 2016). Sasfin’s national scale short term rating was not sufficient in a standalone manner to support the tranches of SASP 1 & SASP 2 rated greater than AA-(ZA) as discussed in GCR’s Global Structured Finance Rating Criteria, Feb 2016.
As per GCR’s Global Structured Finance Rating Criteria, Feb 2016: “Securitisations rely to a certain extent on counterparties such as the collection and issuer account bank, the hedge provider, the liquidity facility provider, the originator in its capacity as asset servicer, and issuers of securities in which the SPV may temporarily invest retained cash (‘Permitted Investments’). In order to support a rating higher than that of the originator, GCR expects transaction counterparties to meet the counterparty criteria summarised in Appendix C of the Criteria. GCR expects at closing that transaction documentation incorporates its counterparty criteria. If transaction documentation does not incorporate these criteria, GCR’s rating panel will factor this into the credit analysis, with one potential outcome being a rating cap. The potential capping of a rating depends on how important the counterparty is to the transaction. The underlying analytical assumption of the criteria listed in Appendix C is that a jump-to default of the relevant counterparty within the specified remedial period is sufficiently remote to support the associated maximum achievable securities ratings.
Sasfin proposed and implemented the following to address the mismatch between the required Minimum Short Term Account Bank rating (A1(ZA) with Strong Remedial Language as per GCR’s Criteria) and its Short Term Rating of A1-(ZA):
1. Sasfin along with Nedbank will be appointed as Series Account Bank.
2. If the rating of Sasfin is downgraded by GCR to below A1- (“Sasfin Downgrade”), within 48 (forty eight) hours of becoming aware of the Sasfin Downgrade, Sasfin shall:
I. furnish written notification thereof to Nedbank, the Issuer and the Series Security SPV; and
II. procure that not less than 50% of the aggregate credit balances in the Sasfin Series Bank Accounts are transferred to the corresponding Nedbank Series Bank Accounts;
III. within a period not exceeding 30 Business Days after the Downgrade Trigger Date (the “Remaining Period”), Sasfin shall procure that the balance of the aggregate credit balances in the Sasfin Series Bank Accounts are transferred to the corresponding Nedbank Series Bank Accounts; and
IV. by no later than the Downgrade Trigger Date, Sasfin shall obtain a guarantee from a suitable Eligible Institution in respect of its obligations to the Issuer during the Remaining Period.
i. with effect from the first Business Day following the expiry of the Remaining Period:
ii. Nedbank shall be deemed to have replaced Sasfin as the Series Account Bank, Nedbank hereby accepting its appointment as the Series Account Bank with effect from the Replacement Date, subject to the terms of this Agreement; and
iii. all references to the Series Account Bank shall be deemed to be references to Nedbank, in its capacity as the Series Account Bank.
3. If the rating of the Series Account Bank (other than Sasfin) is downgraded to below the Required Credit Rating then within 30 (thirty) days after becoming aware of such downgrade, the Series Account Bank shall:
I. procure the appointment of a suitable Eligible Institution to act as Series Account Bank in its place; or
II. obtain a guarantee from a suitable Eligible Institution in respect of its obligations to the Issuer.
An Eligible Institution being one rated A1+(ZA).
Given the above GCR is comfortable that the remedial language is sufficient to support the rating of the notes issued and to be issued.
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. For more information, please read the South African Securitisation Programme (RF) Limited Series 1 Surveillance Report published on 23 June 2016.
South African Securitisation Programme (RF) Limited Series 1
South African Securitisation Programme (RF) Limited Series 2
+27 11 784 1771
Sector Head: Structured Finance Ratings
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’16;
Global Consumer Asset Backed Securitisation Rating Criteria – May ’16
SASP Series 1 New Issuance Report – Dec ’15;
SASP Series 1 Surveillance Report – Jun ’16; and
Sasfin Holdings Limited Financial Institution Report – May ’16.
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.|
|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.|
|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.|
|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.|
|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.|
|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.|
|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 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.|
|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.|
|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.|
|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, securities or financial instruments being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, securities or financial instruments; 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 and other reliable third parties to accord the credit ratings included the latest Issuer’s audited annual financial statements for the year ending June 2015; portfolio performance data relating to the underlying equipment lease portfolio covering the period June 2002 – April 2016; an overview of the Issuer’s lease portfolio as per 30 April 2016 and monthly management reporting packs.
South African Securitisation Programme (RF) Limited Series 1 & Series 2 – Ratings Affirmed, Post Series Account Bank change