Johannesburg, 23 November 2017 — Global Credit Ratings (“GCR”) has affirmed the final, public long-term credit ratings and rating outlooks accorded to the following Series 2 Notes issued by the South African Securitisation Programme (RF) Limited (“SASP” or the “Issuer”):
ZAR 280.0m, Class A2, stock code LRFA2, interest at 3M Jibar + 1.80%, due 17 November 2025: …. ‘AA(ZA)(sf)’, Outlook Stable.
ZAR 52.5m, Class B2, stock code LRFB2, interest at 3M Jibar + 2.35%, due 17 November 2025: ….. ‘A(ZA)(sf)’, Outlook Stable.
ZAR 17.5m, Class C2, stock code LRFC2, interest at 3M Jibar + 2.95%, due 17 November 2025: … ‘BBB(ZA)(sf)’, Outlook Stable.
SUMMARY RATING RATIONALE
SASP Series 2 is a public securitisation of rental and lease financed assets, originated by Sasfin, Sunlyn and other entities approved by Sasfin. 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 transaction’s performance depends on the ability of the Servicer and the Standby Servicer to collect the equipment lease rentals. GCR is comfortable that Sasfin is capable of adequately managing this process.
GCR reviewed the performance of the transaction over the period from April 2017 to September 2017. The portfolio performed satisfactorily over the period under review with no breaches in any Portfolio Covenants or any Performance Tests and therefore no Early Amortisation Events were recorded. Performing leases were reported at a higher 95.3% of total assets at 30 September 2017, in comparison with 87.7% reported in May 2017. In addition, the required overcollateralization continued to be funded at the requisite 10% of Series 2 Notes outstanding or R35m, with the mix of funding predominately comprising of assets.
Sasfin Bank Limited has acted as the Seller and Servicer on all the SASP Series transactions and is currently rated ‘BBB+(ZA)’ and ‘A1-(ZA)’ by GCR on the long-term and short-term national scale respectively, with a Stable outlook. The ratings were affirmed in May 2017. For more information on the SASP Series 2 transaction, please read the South African Securitisation Programme (RF) Limited Series 2 Surveillance Report published in November 2017.
The final, public credit rating accorded to the Class A2 Notes relates to timely payment of interest and ultimate payment of principal by their Final Maturity Date, whilst the ratings accorded to the Class B2 and Class C2 Notes relate to ultimate payment of interest and principal by their Final Maturity Date. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any 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 – Feb ’17;
Global Consumer Asset Backed Securitisation Rating Criteria – May ’17;
GCR’s SASP Series 2 New Issuance Report – Nov ’16; and
GCR’s Sasfin Bank Limited Financial Institution Credit Rating Report – May ’17.
RATING LIMITATIONS AND DISCLAIMERS
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|Amortisation||From a liability perspective, the paying off of debt in a series of installments over a period of time. From an asset perspective, the spreading of capital expenses for intangible assets over a specific period of time (usually over the asset’s useful life).|
|Asset||An item with economic value that an entity owns or controls.|
|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.|
|Early Amortisation Event||An event that causes a transaction to change from a revolving period to amortising, primarily to windup the transaction and to repay Noteholders.|
|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.|
|Loan||A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|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.|
|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).|
|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.|
|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.|
|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.|
|Servicer||A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.|
|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.|
|Subordinated Loan||A loan typically given by the Issuer to the securitisation vehicle that is more junior than a junior tranche.|
|Surveillance||Process of monitoring a transaction according to triggers, covenants and key performance indicators.|
|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.|
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 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 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:
- Portfolio performance data covering the period September 2009 – September 2017;
- The Issuer’s audited annual financial statements for the year ending 30 June 2017; and
- Monthly management reporting packs up to 30 September 2017.
The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.