Johannesburg, 24 May 2018 — Global Credit Ratings (“GCR”) has affirmed the final, public long-term credit ratings and outlooks accorded to the following Class A, Class B and Class C Notes issued by The Thekwini Fund 11 (RF) Ltd (‘Thekwini 11” or the “Issuer”):
|Class A2 Notes,||due 18 July 2041;||AAA(ZA)(sf)||Stable Outlook;|
|Class A3 Notes,||due 18 July 2041;||AAA(ZA)(sf)||Stable Outlook;|
|Class A5 Notes,||due 18 July 2041;||AAA(ZA)(sf)||Stable Outlook;|
|Class A6 Notes,||due 18 July 2041;||AAA(ZA)(sf)||Stable Outlook;|
|Class A8 Notes,||due 18 July 2041;||AAA(ZA)(sf)||Stable Outlook.|
|Class B1 Notes||due 18 July 2041;||AA+(ZA)(sf)||Positive Outlook;|
|Class B2 Notes||due 18 July 2041;||AA+(ZA)(sf)||Positive Outlook;|
|Class B3 Notes,||due 18 July 2041;||AA+(ZA)(sf)||Positive Outlook;|
|Class C1 Notes,||due 18 July 2041;||BBB+(ZA)(sf)||Positive Outlook;|
|Class C2 Notes,||due 18 July 2041;||BBB+(ZA)(sf)||Positive Outlook;|
|Class C3 Notes,||due 18 July 2041;||BBB+(ZA)(sf)||Positive Outlook.|
The Transaction also has Class D Notes of R67,000,000 and a subordinated Start-Up Loan of R79,810,000, which are both unrated. 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, whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal by the 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.
Thekwini 11 has an amortising R4bn Residential Mortgage Backed Securities Programme (the “Programme”), comprising of home loans originated by SA Home Loans (Pty) Ltd (“SAHL”). The Programme’s Revolving Period ended in January 2015 and since then, all the Notes with a designated Class A1 ranking began amortising and were fully redeemed in October 2017. The remaining Notes have a coupon step-up date on 18 July 2018, which will potentially result in an increased cost of funding, however, the Issuer has indicated its intention to exercise the call option to redeem the Notes on the step-up date. Nonetheless, GCR incorporated the higher margin (applicable should the Notes not be redeemed on this date) in its rating analysis.
The excess spread generated by the structure has gradually increased since January 2017 (0.41%) up to a historical maximum of 1.07% of outstanding Notes at 18 April 2018. This was mainly driven by robust portfolio performance, resulting in limited amounts of excess spread being trapped in respect of loans with arrears greater than or equal to 10 months instalments. In addition, cumulative losses to date were maintained at a minimum and were reported as 0.11% of the aggregate portfolio of assets at the end of the Revolving Period (R3.5bn) at 18 April 2018.
There were no breaches in any covenants reported over the 12 month review period. As the portfolio amortises, the Transaction continues to display a relatively robust performance, with committed Loan-to-Value (“LTV”) and Payment-to-Income (“PTI”) reported as 60.04% and 16.09% at 18 April 2018, further below the covenants of 69.10% and 18.48% respectively (April 2017: 61.87% and 16.33%). For more information regarding the Transaction, please refer to the Thekwini 11 New Ratings Report issued in April 2016, as well as the Thekwini 11 Surveillance Report to be published in May 2018.
|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 Residential Mortgage Backed Securities Rating Criteria – May ’17;
The Thekwini Fund 11 (RF) Limited New Ratings Report – Apr ’16; and
The Thekwini Fund 11 (RF) Limited Surveillance 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.
|Arrears||General term for non-performing obligations, i.e. obligations that are more than three (3) months overdue.|
|Arrears Reserve||An accounting provision made in a reserve fund for arrears.|
|Capital||The sum of money that is used to generate proceeds.|
|Coupon||Interest payment on a security.|
|Covenant||A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.|
|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.|
|Income||Money received, especially on a regular basis, for work or through investments.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|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.|
|Option||Either a call or a put option. A call option gives the holder the right to buy assets at an agreed price on or before a particular date. A put option gives the holder the right to sell assets at an agreed price on or before a particular date.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|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).|
|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.|
|Securities||Various instruments used in the capital market to raise funds.|
|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.|
|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.|
|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.|
|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.|
For a detailed glossary of terms please click here
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 ratings document.
The Servicer participated in the rating process via face-to-face meetings and other written correspondence.
The credit ratings have been disclosed to the Servicer with no contestation of the ratings.
The ratings above were solicited by, or on behalf of the rated client, and therefore, GCR has been compensated for the provision of the ratings.
The information received from the Issuer and other reliable third parties to accord the credit ratings included:
- The final signed and executed transaction documents;
- Quarterly Investor reports of the Issuer up to April 2018;
- Prepayments data;
- Foreclosure and recoveries data; and
- Pool cut as at 31 March 2018.