Johannesburg, 20 April 2016 — Global Credit Ratings (‘GCR’) has accorded a final, public short term credit rating of ‘A1+(ZA)(sf)’ to the Asset Backed Commercial Paper (‘CP’ or the ‘Notes’) issued and to be issued by Synthesis Funding Ltd (‘Synthesis’ or the ‘Issuer’) from time to time under the Issuer’s R15bn hybrid multi-seller Asset Backed Commercial Paper (‘ABCP’) Programme (the ‘Programme’). The final, public rating accorded relates to the timely payment of interest and principal.
RATING RATIONALE
Synthesis is a hybrid multi-seller ABCP Program with the ability to finance or acquire Financial Assets, Rated Securities and Participating Eligible Investments, subject to eligibility criteria that are set out in the Transaction Documents. The Notes are secured zero coupon, rand denominated Notes, with a maturity of not more than 364 days, which are issued at a discount to their face value and may be redeemed early, at the present value of the date on which the Notes are to be redeemed, upon an Event of Default of the Issuer.
The Liquidity Facility (‘LF’) requirements of the Programme are the minimum of the face value of all outstanding notes plus the aggregate senior expenses. The liquidity facilities may be drawn down to cover cash flow deficiencies that arise from timing mismatches and markets risks. Nedbank is currently the sole LF Provider that ensures that the Minimum Liquidity commitment is met. The Programme benefits from 100% Liquidity Support from Nedbank.
The Programme Wide Credit Enhancement Facility Amount (‘PWCE’) is made up of 5% of the aggregate book value of Financial Assets financed or acquired by the Issuer and a dynamic percentage of all Rated Participating Assets based on the credit quality assigned to each of the Rated Participating Assets in the portfolio. As of 29 February 2016, the Programme mainly funds corporate loans, RMBS and bond obligations. Synthesis does not have any Financial Assets in its portfolio and all acquired Rated Securities are rated AA-(ZA) or above, or are guaranteed by Nedbank if rated below AA-(ZA), therefore PWCE is not currently required. The Programme also has a Prepayment Facility in place to mitigate prepayment risk arising from Participating Assets.
Synthesis will be monitored and GCR will perform regular surveillance on the Programme.
For more information on the Programme, please refer to the “Synthesis Funding Limited – New Ratings Report” to be published on 20 April 2016. GCR analysed the Programme by applying its: Global Structured Finance Rating Criteria (Feb’16); Global Asset Backed Commercial Paper Rating Criteria (Dec’15); its Global Master Criteria for Rating Banks and Other Financial Institutions (Mar’16); with reference to its Nedbank Limited Rating Report (May’15).
NATIONAL SCALE RATINGS HISTORY
ANALYTICAL CONTACTS
Rishentra Naidoo
Senior Credit Analyst
+27 11 784 1771
Bridget Masendeke
Junior 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);
- Global Asset Backed Commercial Paper Rating Criteria (Dec’15);
- Global Master Criteria for Rating Banks and Other Financial Institutions (Mar’16);
- Nedbank Limited Rating Report (May’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.
| Agreement | A negotiated and usually legally enforceable understanding between two or more legally competent parties. |
| Asset | An item with economic value that an entity owns or controls. |
| Collateral | An asset pledged as security in event of default. |
| Commercial Paper | A debt security of short term nature, less than a year. |
| 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 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). |
| Debt | An obligation to repay a sum of money. |
| 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 Redemption | The repurchase of a bond by the issuer before it matures. |
| Eligibility Criteria | Limitations imposed on the type and quality of assets that can be sold by the Originator / Servicer into the Securitisation vehicle which ensure the transaction will track the performance of historical data analysed as closely as possible. |
| Hybrid | A form of security that has characteristics of various types of transaction or product. |
| Issuer | The party indebted or the person making repayments for its borrowings. |
| Liability | All financial claims, debts or potential losses incurred by an individual or an organisation. |
| Liquidity | The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity. |
| Liquidity Facility | A facility provided to a structured finance transaction that will pay the Noteholders interest in the event that the underlying assets cash flows are inadequate. |
| 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. |
| Loss | A tangible or intangible, financial or non-financial loss of economic value. |
| National Scale Rating | The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state. |
| Noteholder | Investor of capital market securities. |
| 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. |
| 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. |
| Redemption | The repurchase of a bond at maturity by the issuer. |
| Securities | Various instruments used in the capital market to raise funds. |
| 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. |
| 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. |
| 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. |
| 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. |
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 information 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 rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.
GCR received the Programme Memorandum in relation to Synthesis, monthly investor reports from May 2009 to February 2016, satisfactory copies of all executed transaction documents, a signed legal opinion and the signed amendments to Transaction Documents where applicable.
