Indicative Rating Actions Rating Alerts Structured Finance

GCR accords indicative ratings to New Notes to be issued by SASP Series 1, and places existing Notes

Johannesburg, 10 May 2019 – GCR Ratings (“GCR”) has accorded indicative, public long-term credit ratings to the following Classes of Notes (the “New Notes”) to be issued by the South African Securitisation Programme (RF) Limited – Series 1 (“SASP 1” or the “Issuer”) on or about 17 May 2019:

Class A26,Stock code TBA;R178,000,000;AAA(ZA)(sf);Stable outlook;
Class B6,Stock code TBA;R16,000,000;AAA(ZA)(sf);Stable outlook;
Class C6,Stock code TBA;R6,000,000;AAA(ZA)(sf);Stable outlook.

Concurrently, GCR has placed the ratings of the existing Notes listed below on Rating Watch Positive, pending certain anticipated amendments to align the SASP 1 transaction documents to GCR’s updated rating criteria. GCR updated its Global Master Structured Finance Rating Criteria and Global Consumer Asset-Backed Securitisation (“ABS”) Rating Criteria in September 2018. The amendments to the transaction documents are anticipated to be completed by the date of issuance of the New Notes. This, together with the updates to the rating stresses under the Global Consumer ABS Rating Criteria, the amended base case cumulative default and recovery assumptions, as well as the build-up of credit enhancement in the transaction, is expected to have a positive impact on the ratings assigned to the existing Notes. The ratings of the maturing Class A22, Class B5 and Class C5 Notes are expected to be withdrawn upon full redemption, following the issuance of the abovementioned notes.

Class A21,Stock code ERSA21;R155,000,000;AAA(ZA)(sf);Rating Watch Positive;
Class A22,Stock code ERSA22;R178,000,000;AAA(ZA)(sf);Rating Watch Positive;
Class A23,Stock code ERSA23;R230,000,000;AAA(ZA)(sf);Rating Watch Positive;
Class A24,Stock code ERSA24;R108,000,000;AAA(ZA)(sf);Rating Watch Positive;
Class A25,Stock code ERSA25;R281,000,000;AAA(ZA)(sf);Rating Watch Positive;
Class B4,Stock code ERS3B4;R99,000,000;A(ZA)(sf);Rating Watch Positive;
Class B5,Stock code ERS3B5;R16,000,000;A(ZA)(sf);Rating Watch Positive;
Class C4,Stock code ERS3C4;R35,000,000;BBB(ZA)(sf);Rating Watch Positive;
Class C5,Stock code ERS3C5;R6,000,000;BBB(ZA)(sf);Rating Watch Positive.

The indicative and final public ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal by the Final Redemption Date of each Class of Notes respectively, while the ratings accorded to the Class B and Class C Notes relate to ultimate payment of interest and principal by the Final Redemption Date. The ratings exclude an assessment of the ability by the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.

SUMMARY RATING RATIONALE

GCR has accorded the above indicative credit ratings to the SASP 1 Notes based on the following key factors:

SASP 1 is a revolving series and is the first of three series of the R5bn multi-seller segregated asset-backed note programme of rental and equipment lease financed assets originated by Sasfin. The pool of assets in SASP 1 is made up of equipment leases primarily for office equipment. The transaction benefits from an aggregate R189.4m that comprises the unrated Subordinated Loan and First Loss Loan, which are partially used to fund the Reserve Fund as well as to provide credit enhancement to the Notes.

GCR modelled the transaction in a Pre-Enforcement Amortisation scenario as per the updated Global Consumer ABS Rating Criteria. The transaction was previously modelled in a Post-Enforcement scenario. In addition, the cumulative default and recovery base cases were amended to reflect the observed historical performance and to enhance the comparability of ratings assigned by GCR for transactions in the same asset class. The utilisation of excess spread to purchase additional assets by the Issuer, among other factors, has resulted in the build-up of credit enhancement in the structure.

For more information in respect of the transaction and GCR’s analysis, please refer to the SASP 1 Pre-Funding Report published in May 2019, as well as the SASP 1 New Ratings Report published in December 2015. GCR analysed the transaction by applying its Global Master Structured Finance Rating Criteria (Sep’18) and Global Consumer Asset-Backed Securitisation Rating Criteria (Sep’18); with reference to its updated cash flow model report, Global Master Criteria for Rating Banks and Other Financial Institutions (Mar’17) and Sasfin Bank Limited Rating Report (May’18).

NATIONAL SCALE RATINGS HISTORY  
      
Security ClassStock codeInitial RatingLong Term RatingShort-term ratingOutlook
Class A21ERSA2117 December 2015AAA(ZA)(sf)n.aStable
Class A22ERSA2229 April 2016AAA(ZA)(sf)n.aStable
Class A23ERSA2318 August 2016AAA(ZA)(sf)n.aStable
Class A24ERSA2431 August 2017AAA(ZA)(sf)n.aStable
Class A25ERSA2531 August 2017AAA(ZA)(sf)n.aStable
*Class A26TBA10 May 2019AAA(ZA)(sf)n.aStable
Class B4ERS3B417 December 2015A(ZA)(sf);n.aStable
Class B5ERS3B529 April 2016A(ZA)(sf);n.aStable
*Class B6TBA10 May 2019AAA(ZA)(sf)n.aStable
Class C4ERS3C417 December 2015BBB(ZA)(sf)n.aStable
Class C5ERS3C529 April 2016BBB(ZA)(sf)n.aStable
*Class C6TBA10 May 2019AAA(ZA)(sf)n.aStable
 
Security ClassStock codeLast RatingLong Term RatingShort-term ratingOutlook
Class A21ERSA2128 March 2018AAA(ZA)(sf)n.aStable
Class A22ERSA2228 March 2018AAA(ZA)(sf)n.aStable
Class A23ERSA2328 March 2018AAA(ZA)(sf)n.aStable
Class A24ERSA2428 March 2018AAA(ZA)(sf)n.aStable
Class A25ERSA2528 March 2018AAA(ZA)(sf)n.aStable
*Class A26TBA10 May 2019AAA(ZA)(sf)n.aStable
Class B4ERS3B428 March 2018A(ZA)(sf);n.aStable
Class B5ERS3B528 March 2018A(ZA)(sf);n.aStable
*Class B6TBA10 May 2019AAA(ZA)(sf)n.aStable
Class C4ERS3C428 March 2018BBB(ZA)(sf)n.aStable
Class C5ERS3C528 March 2018BBB(ZA)(sf)n.aStable
*Class C6TBA10 May 2019AAA(ZA)(sf)n.aStable

* Indicative ratings

ANALYTICAL CONTACTS

Primary Analyst
Tinashe Mujuru
Structured Finance Analyst
(011) 784-1771
tinashem@GCRratings.com
 
Secondary Analyst
Gary Nyoni
Structured Finance Analyst
(011) 784-1771
garyn@GCRratings.com
 
Committee Chairperson
Yohan Assous
Sector Head: Structured Finance Ratings
(011) 784-1771
yohan@GCRratings.com

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

  • Global Master Structured Finance Rating Criteria (Sep’18);
  • Global Consumer Asset-Backed Securitisation Rating Criteria (Sep’18);
  • Global Master Criteria for Rating Banks and Other Financial Institutions (Mar’17);
  • SASP Series 1 New Issuance Report (Dec’15); and
  • SASP Series 1 Surveillance Report (Mar’18)

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 AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. 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.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings are 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 management 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.

The information received from the Arranger and other reliable third parties to accord the credit ratings included:

  • Pool Cut for the Portfolio at February 2019;
  • Static Cumulative default and recovery data up to quarter ending March 2019;
  • Historic Prepayments up to February 2019;
  • Senior Expenses information;
  • Draft Addendum to the Account Bank Agreement;
  • Draft Legal opinion;
  • Draft Supplement to the Series Supplement;
  • Draft Addendum to the Series Servicer Agreement;
  • Draft Applicable Pricing Supplements for the New Notes, and
  • SASP 1 Surveillance Reports up to December 2018.

The ratings above were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY

AmortisationFrom a liability perspective, the paying off of debt in a series of instalments 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).
AssetAn item with economic value that an entity owns or controls.
Cash FlowA financial term for monetary changes in operations, investing and financing activities.
CreditA 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 EnhancementLimited 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 RatingAn 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.
DefaultA 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.
EnforcementTo make sure people do what is required by a law or rule et cetera.
International Scale Rating LCInternational 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.
IssuerThe party indebted or the person making repayments for its borrowings.
LeaseAgreement 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.
LoanA 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 RatingA 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.
LossA tangible or intangible, financial or non-financial loss of economic value.
PrincipalThe total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
RecoveryThe action or process of regaining possession or control of something lost. To recoup losses.
RedemptionThe repurchase of a bond at maturity by the issuer.
RefinanceThe issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.
RentPayment from a lessee to the lessor for the temporary use of an asset.
RepaymentPayment 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 FundA 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.
SecuritisationIs a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.
Short-Term RatingA 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.
Structured FinanceA method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk.
Subordinated LoanA loan typically given by the Issuer to the securitisation vehicle that is more junior than a junior tranche.
Timely PaymentThe principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.
TransactionA 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 PaymentA 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



ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright 2019 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.