ZAR 1,650 Million of Debt Securities Affected
Johannesburg, December 09, 2010 -- Moody's Investors Service has today assigned definitive credit ratings
to the following classes of notes issued by The Thekwini Fund 8 (Pty)
Ltd (Thekwini 8):
Aa2 (sf) /Aaa.za (sf) to the ZAR 350,000,000 Senior
Class A1 Mortgage Backed Floating Rate Notes due April 2036
Aa2 (sf) /Aaa.za (sf) to the ZAR 277,000,000 Senior
Class A2 Mortgage Backed Floating Rate Notes due April 2036
Aa2 (sf) /Aaa.za (sf) to the ZAR 845,000,000 Senior
Class A3 Mortgage Backed Floating Rate Notes due April 2036
A3 (sf) /Aa3.za (sf) to the ZAR 92,400,000 Senior Class
B Mortgage Backed Floating Rate Notes due April 2036
Baa3 (sf) /A3.za (sf) to the ZAR 69,300,000 Senior
Class C Mortgage Backed Floating Rate Notes due April 2036
CHANGES FROM PROVISIONAL RATING DATE
The following changes were made between the provisional rating date (8
November 2010) and the closing date (1 December 2010), namely i)
total note issuance increased from ZAR1.50 billion to ZAR1.65
billion; ii) weighted average note margin reduced from 1.72%
to 1.43% and iii) the note structure was amended with the
reserve fund reducing from 2.3% to 2.1%.
The above changes resulted in the class B note being changed from (P)
Baa1/A1.za (sf) to A3/Aa3.za (sf).
RATINGS RATIONALE
The transaction represents the eighth public term securitisation of South
African residential mortgage loans originated by SA Home Homes (Pty) Ltd
("SAHL") (not rated). The assets supporting the notes
are prime mortgage loans secured on residential properties located in
the South Africa. SAHL is the servicer and administrator and The
Standard Bank of South Africa ("SBSA")(A1/P-1) is the
back-up servicer and administrator.
The ratings of the notes takes into account the credit quality of the
underlying mortgage loan pool, from which Moody's determined the
MILAN Aaa Credit Enhancement and the portfolio expected loss, as
well as the transaction structure and any legal considerations as assessed
in Moody's cash flow analysis.
The expected portfolio loss of 1.80% and the MILAN Aaa required
Credit Enhancement of 8.0% served as input parameters for
Moody's cash flow model, which is based on a probabilistic lognormal
distribution as described in the report "The Lognormal Method Applied
to ABS Analysis", published in September 2000.
The key driver for the MILAN Aaa Credit Enhancement number is current
the level of self employed (16.2%) and non-owner
occupied properties (7.6%); the borrower concentration
(number of mortgage loan equals 3,195 which is below Moody's benchmark
portfolio of 5000 loans); and structure allows (until 15 January
2015) for the funding of redraws, further advances or further loans
to existing borrowers, subject to portfolio limits, notably
i) the weighted-average loan-to-value (LTV) of 62.7%
(currently 62.2%); (ii) self employed limit of 17.5%;
and iii) non-owner occupied limit of 8.0%.
The key drivers for the portfolio expected loss are (i) the historical
default and loss performance on previous Thekwini transactions; ii)
performance of the SAHL book; (iii) benchmarking with comparable
transactions in the South Africa RMBS market; and iv) current economic
environment in South Africa. Given the above, Moody's believes
the assumed expected loss is appropriate for this transaction.
Moody's has increased the expected loss from 1.30%
in previous Thekwini transactions to 1.80% mainly due to
the weaker performance of the SAHL book in recent years and over 90%
of the mortgage loans have been originated in 2009 and 2010, a period
of declining and low interest rates. This exposes the portfolio
to potential increase in defaults caused by sudden increases in interest
rates over the short to medium term.
The definitive ratings address the expected loss posed to investors by
the legal final maturity. In Moody's opinion the structure
allows for timely payment of interest and ultimate payment of principal
at par on or before the rated final legal maturity date. Moody's
ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
The V-Score for this transaction is Medium. The key driver
for this score is the fact that it is a standard South African RMBS structure
for which Moody's has about 10 years of historical performance data.
The primary source of uncertainty surrounding our assumptions is the limited
data points in a highly stressed environment and the fact that South Africa
is a relatively young securitisation market.
V-Scores are a relative assessment of the quality of available
credit information and of the degree of dependence on various assumptions
used in determining the rating. High variability in key assumptions
could expose a rating to more likelihood of rating changes. The
V-Score has been assigned accordingly to the report "V-Scores
and Parameter Sensitivities in the Major EMEA RMBS Sectors" published
in April 2009.
Moody's Parameter Sensitivities: If the portfolio expected loss
was increased from 1.8% of current balance to 5.4%
of current balance and the MILAN Aaa CE increased from 8.0%
to 12.8%, the model output indicates that the Class
A1, A2 and A3 notes would have been Aa2/Aaa.za, Aa2/Aaa.za,
and Baa1/A1.za respectively, assuming that all other factors
remain equal.
Moody's Parameter Sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's structured
finance security may vary if certain input parameters used in the initial
rating process differed. The analysis assumes that the deal has
not aged and is not intended to measure how the rating of the security
might migrate over time, but rather how the initial rating of the
security might have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are calculated
by stressing key variable inputs in Moody's primary rating model.
The principal methodologies used this rating were Moody's Approach
to Rating South African RMBS published in January 2005, and Cash
Flow Analysis in EMEA RMBS: Testing Features with the MARCO Model
(Moody's Analyser of Residential Cash Flows) published in January
2006.
Moody's Investors Service received and took into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction and the due diligence report had a neutral impact
on the rating.
Moody's has assessed the impact of a systemic event on the ratings
to the senior notes. Moody's assumes two inputs in its analysis
i) the economic resiliency of the country (country's economic strength
and its institutional strength) and ii) an event loss (an assumed worse
case loss to the structure in the event of a systemic problem).
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale ratings, please refer to Moody's Rating Implementation
Guidance published in August 2010 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
The reports mentioned above are available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Additional research, including the new issue report for this transaction
and reports for prior transactions, are available at www.moodys.com.
In addition Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Johannesburg
Dion Bate
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Milan
Michelangelo Margaria
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Moody's Investors Service South Africa (Pty) Ltd.
The Forum
2 Maude Street
2196 Sandton
Johannesburg
South Africa
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns definitive ratings to South African RMBS issued by The Thekwini Fund 8 (Pty) Ltd
