Johannesburg, 29 August 2017 — Global Credit Ratings (“GCR”) has accorded a final, public short-term credit rating of ‘A1+(ZA)(sf)’ to the Class A Notes to be 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 will be 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 different serialised Notes with different serialised assets. The Participating Assets of VST1 will consist of: Negotiable certificates of deposit (“NCDs”) that will be 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 NCDs will be acquired through Liberty Group Ltd, acting in its capacity as Programme Dealer, in terms of the Transaction’s portfolio covenants.
The portfolio covenants limits the composition given the Maturity Amount of the participating assets to: Single Bank NCD may not be more than 50% should the Maturity Amount of Notes be less than or equal to R1bn. Should the Maturity Amount of Notes be more than R1bn then the single bank NCD exposure may not be more than 40% to FirstRand Bank Ltd, Absa Bank Ltd, Nedbank Ltd and Standard Bank of South Africa Ltd and 30% for Investec Bank Ltd, and at least three of FirstRand Bank Ltd, Absa Bank Ltd, Nedbank Ltd, Standard Bank of South Africa Ltd and Investec Bank Ltd.
All of the existing eligible banks referenced in the portfolio covenant have a short-term national scale credit rating of ‘A1+(ZA)’ and a long-term national scale credit rating of at least ‘AA-(ZA)’ with a stable outlook.
Liberty Group Ltd has been appointed as the Liquidity Facility Provider to fund any potential liquidity shortfalls that may occur from time to time. Liberty Group Ltd has a ‘AAA’ and ‘A1+’ long-term and short-term national scale credit rating.
Following a Credit Event, defined as where the Participating Asset/s becomes Non-Performing, the Issuer shall apply a mandatory conversion that will convert the nominal value of the Class A Notes asset to Class B Notes of the same value at no consideration. The Class B Notes being the work out Notes will only be redeemed after all recoveries and work out arrangements have been completed
The portfolio will consist of highly rated counterparts, albeit non-granular given the portfolio covenants. Therefore, GCR will take rating action on the Class A Notes should the short-term national scale ratings of the eligible banks held by the Transaction 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
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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,
And the Financial Institution ratings for: FirstRand Bank Limited – Nov ’16, ABSA Bank Limited – May ’17, Nedbank Limited – May ’17, Standard Bank of South Africa Limited – May ’17, and Investec Bank Limited – Oct ’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.|
|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.|
|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.|
|Guarantee||An undertaking for performance of another’s obligations in event of default.|
|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.|
|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).|
|Repack||Rearrangement of securities with the intent to be more attractive for investment. Junior tranches (that have a higher degree of default risk) of a securitisation transactions that have been repackaged into separate debt securities (according to their degree of risk) that utilise credit-enhancement techniques to mitigate the risk. A CDO is created to distribute the prepayment risk amongst different classes of Notes.|
|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.|
|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.|
|Senior||A security that has a higher repayment priority than junior securities.|
|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.|
|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 in this announcement 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 with no contestation of the rating.
GCR has received final signed and executed copies of the Programme Memorandum; Administration Agreement; Agency Agreement; Asset Allocation Agreement; Bank Agreement; Common Terms Agreement; Issuer Supplement; Liquidity Facility; Programme Agreement; Series Guarantee; Series Indemnity; Series Security Cession and Transaction Supplement.
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.