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Announcement:

MOODY'S AFFIRMS RATINGS ON FIVE SOUTH AFRICAN RMBS OF THE THEKWINI SERIES FOLLOWING THE INTRODUCTION OF HEDGE COMPANY STRUCTURE

10 Nov 2005
MOODY'S AFFIRMS RATINGS ON FIVE SOUTH AFRICAN RMBS OF THE THEKWINI SERIES FOLLOWING THE INTRODUCTION OF HEDGE COMPANY STRUCTURE

Johannesburg, November 10, 2005 -- Moody's affirms the existing ratings assigned to Notes issued by Thekwini Fund 1 Limited and Thekwini Fund 2, 3, 4 and 5 (Proprietary) Limited ("Thekwini") transactions following the setting up of a Hedge Company structure that will administer the hedging transactions on behalf of the above five transactions.

Apart from the fixed rate A-3 Notes issued by Thekwini 3, 4, and 5 and prior to the inclusion of the new mortgage interest rate products (discussed below), the interest rate risk is mitigated by the matched Jibar based interest rate on the home loan products and the Notes issued by the Thekwini transactions. The Jibar / fixed interest rate risk in respect of the A-3 Notes is mitigated by a floating/fixed interest rate swap with a Hedge Counterparty with the Required Credit Rating.

Over the last year South African Home Loans (Proprietary) Limited ("SAHL") has launched two mortgage interest rate products, which are currently being offered to all SAHL borrowers including to borrowers of the securitised mortgage loans:

1. Capped interest rate product allowing the home loan borrower to cap the interest rate payable on the mortgage home loan for a period of 2 years; and

2. Fixed interest rate product ("VariFix") where the home loan borrower can elect to fix all or a portion of the interest rate payable on the mortgage home loan for a period of 20 years.

The introduction of these mortgage interest rate products, exposes each Thekwini transaction to interest rate risk, as each Thekwini Issuer receives a capped or fixed rate from home loan borrowers who have entered into a capped or VariFix product* and pays a floating Jibar linked interest rate to Thekwini Noteholders. In order to mitigate this interest rate risk, each Issuer is obliged to take out an interest rate hedge with a Hedge Counterparty with the Required Credit Rating (Baa2/Prime-2** or A1.za/Prime-1.za) in terms of which on each interest payment date the net interest payments (difference between Jibar + 2.1% and the cap or fixed rates based on the notional amount of the swap) are settled between the Issuer and the Hedge Counterparty.

In order to facilitate the various swap transactions on behalf of all SPV's, a new insolvency remote private company, South African Home Loans Hedge Company (Proprietary) Limited ("HedgeCo"), has been established. HedgeCo has been set-up as a pass through structure which is owned by an Owner Trust independent of SAHL.

Following the sale of capped or VariFix products to SAHL borrowers, HedgeCo will enter into swap transactions with the Hedge Counterparty on behalf of each SPV. Simultaneously, HedgeCo will daily cede its rights in terms of the swap transactions to the various SPV's.

SAHL, acting as administrator of HedgeCo, will maintain a daily schedule recording where each capped or VariFix mortgage home loan is located. This schedule will determine the notional split between each SPV which will be used to allocate the payments under the swap transactions to each SPV on each interest payment date. In order to monitor SAHL as administrator, bi-annual audits will be conducted by independent external auditors ensuring that SAHL is correctly performing the management and calculation functions of HedgeCo on behalf of all the SPV's. The Standard Bank of South Africa ("SBSA")(Baa1/Prime-2/C+)** can together with the majority vote of all the SPV's terminate SAHL's appointment as administrator, where upon SBSA (back-up administrator) will take-over the administration responsibility.

All swap transactions to be entered into by HedgeCo with a Hedge Counterparty are subject to Moody's standard swap requirements. If the Hedge Counterparty is downgraded below the Required Credit Rating the obligations of the Hedge Counterparty will either be guaranteed, cash collateralised or the Hedge Counterparty will be replaced by another Hedge Counterparty with the Required Credit Rating. In the event that there is non-payment by one of the SPV's to HedgeCo, the Hedge Counterparty is prevented from liquidating HedgeCo i.e. no cross default. In this instance the Hedge Counterparty will be entitled to proceed directly against the relevant SPV responsible for the non-payment.

Moody's has reviewed the above HedgeCo structure together with SAHL's ability to administer the swap transactions and concluded that the HedgeCo structure and documentation are consistent with the assigned Moody's ratings on all outstanding Notes in respect of the Thekwini Fund 1, 2, 3, 4 and 5.

* There are currently no VariFix mortgage home loans in the Thekwini transactions as these do not meet the current Thekwini eligibility criteria.

** These are Global Scale Ratings and NOT National Scale Ratings.

For further details on these transactions, please refer to the New Issue Reports and Performance Overviews available on www.moodys.com

Johannesburg
Dion Bate
Associate Analyst
Structured Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Johannesburg
Reynold Leegerstee
General Manager
Structured Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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