ZAR [1,500] Million of Debt Securities Affected
Johannesburg, November 08, 2010 -- Moody's Investors Service has today assigned provisional credit ratings
to the following classes of notes issued by The Thekwini Fund 8 (Pty)
Ltd (Thekwini 8):
(P)Aa2 (sf) /Aaa.za (sf) to the ZAR [330,000,000]
Senior Class A1 Mortgage Backed Floating Rate Notes due April 2036
(P)Aa2 (sf) /Aaa.za (sf) to the ZAR [235,500,000]
Senior Class A2 Mortgage Backed Floating Rate Notes due April 2036
(P)Aa2 (sf) /Aaa.za (sf) to the ZAR [375,000,000]
Senior Class A3 Mortgage Backed Floating Rate Notes due April 2036
(P)Aa2 (sf) /Aaa.za (sf) to the ZAR [397,500,000]
Senior Class A4 Mortgage Backed Floating Rate Notes due April 2036
(P)Baa1 (sf) /A1.za (sf) to the ZAR [82,500,000]
Senior Class B Mortgage Backed Floating Rate Notes due April 2036
(P)Baa3 (sf) /A3.za (sf) to the ZAR [60,000,000]
Senior Class C Mortgage Backed Floating Rate Notes due April 2036
Moody's issues provisional ratings in advance of the final sale of securities
and the above rating reflects Moody's preliminary credit opinions regarding
the transaction only. Upon a conclusive review of the final documentation
and the final note structure, Moody's will endeavor to assign a
definitive rating to the above notes. A definitive rating may differ
from a provisional rating.
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
The key driver for the MILAN Aaa Credit Enhancement number is current
the level of self employed (17.1%) and non-owner
occupied properties (7.9%); the borrower concentration
(number of mortgage loan equals [2,578] 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 [63.5]% (currently %); (ii)
self employed limit of [17.5]%; and iii) non-owner
occupied limit of %.
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 provisional 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, A3 and A4 notes would have been Aa2/Aaa.za,
Aa2/Aaa.za, Baa1/A1.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
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.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
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 pre-sale 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.
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
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Moody's Investors Service South Africa (Pty) Ltd.
Moody's assigns provisional ratings to South African RMBS issued by The Thekwini Fund 8 (Pty) Ltd
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