Johannesburg, 21 August 2018 — Global Credit Ratings (“GCR”) has affirmed the final, public short-term credit rating of ‘A1+(ZA)(sf)’ to the Class A Notes issued by Vineyard Road Investments (RF) Ltd under (“Transaction”) under the Vineyard Series Transaction 1.
The final, public rating accorded to the Class A Notes relates to timely payment of interest and principal. The Issuer may also issue Class B Notes that are unrated. The ratings are derived and dependant on the short-term credit rating of the Participating Assets and the Liquidity Facility Provider.
The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties.
Vineyard Road Investments (RF) Ltd, under Vineyard Series Transaction 1 (“VST1”), is a serialised Programme that allows the issuance of Notes backed by segregated pools of assets.
The Participating Assets of VST1 consist of: Negotiable certificates of deposit (“NCDs”) purchased on an outright basis, with a tenor of up to five years, issued by the five largest banks in South Africa being FirstRand Bank Ltd, Absa Bank Ltd, Nedbank Ltd, The Standard Bank of South Africa Ltd and Investec Bank Ltd.
The Participating Assets of VST1 consist of negotiable certificates of deposit (“NCDs”) with tenors of up to five years issued by the five largest banks in South Africa. The NCDs have and will be acquired by the Issuer, with Liberty Group Ltd (“LGL”) acting as its adviser in its capacity as Asset Allocator. The assets are subject to the portfolio covenants and the Eligibility Criteria. Portfolio covenants require that no single bank’s NCDs may be more than 50% of Participating Assets should the Maturity Amount of the Notes be less than or equal to R1bn. Should the Maturity Amount of the Notes be more than R1bn, then single bank NCD exposure may not be more than 40% to one of either FirstRand Bank Ltd, Absa Bank Ltd, Nedbank Ltd and Standard Bank of South Africa Ltd and may not be more than 30% to Investec Bank Ltd; and the Series must hold NCDs issued by at least three of the following banks: FirstRand Bank Ltd, Absa Bank Ltd, Nedbank Ltd, Standard Bank of South Africa Ltd and Investec Bank Ltd.
All of the portfolio covenants were maintained for the review period and all of the existing eligible banks referenced in the portfolio covenant maintained their short-term national scale credit ratings of ‘A1+(ZA)’. All of the relevant Transaction’s counterparties short-term credit ratings were also maintained at a ‘A1+(ZA)’ or the equivalent. LGL, the Liquidity Facility Provider, has ‘AAA(ZA)’ and ‘A1+(ZA)’ equivalent long-term and short-term national scale credit ratings respectively.
No Credit Event occurred that resulted in (a) Participating Asset(s) becoming Non-Performing. Such an event would cause a mandatory conversion of the nominal value of the Class A Notes to Class B Notes of the same value at no consideration.
The portfolio consists of highly-rated counterparts. However, in consideration of the risks associated with the inherently concentrated nature of the portfolio, GCR is likely to take rating action on the Class A Notes should the short-term national scale ratings of the eligible banks issuing the NCDs held by VST1 be downgraded to below ‘A1+(ZA)’ or if rating action be taken on Liberty Group Ltd that has been appointed as the Liquidity Facility Provider.
|Class A Notes|
Senior Structured Finance Analyst
+27 11 784 1771
Senior Structured Finance Analyst
+27 11 784 1771
Head: Structured Finance Ratings
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Structured Finance Rating Criteria – Feb ’17,
Global Credit-Linked Note and Repackaging Vehicle Rating Criteria – May ’17,
Global Master Criteria for Rating Banks and Other Financial Institutions – Mar ’17,
The Financial Institution ratings for: FirstRand Bank Ltd – Nov ’17, ABSA Bank Ltd – May ’18, Nedbank Ltd – May ’18, Standard Bank of South Africa Ltd – May ’18, and Investec Bank Ltd – Oct ’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.
|Asset||An item with economic value that an entity owns or controls.|
|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.|
|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.|
|Downgrade||The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.|
|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.|
|Exposure||Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on one source of funding.|
|International Scale Rating LC||International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|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.|
|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.|
|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.|
|Performing||An obligation that performs according to its contractual obligations.|
|Principal||The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.|
|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.|
|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.|
|Tenor||The term or duration of a debt security.|
|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.|
For a detailed glossary of terms utilised please click here.
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 ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit ratings 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 rating has been disclosed to the Arranger.
GCR has received the Investor Reports for 29 September 2017, 31 December 2017, 31 March 2018 and 30 June 2018.
The rating above was solicited by, or on behalf of the rated client, and therefore, GCR has been compensated for the provision of the rating.