ZAR [1,185] Million of Debt Securities Rated
London, 21 September 2011 -- Moody's Investors Service has today assigned provisional credit ratings
to the following classes of notes to be issued by The Thekwini Fund 9
(Pty) Ltd (Thekwini 9):
• (P)Aa2 (sf) /Aaa.za (sf) to the ZAR [238,680,000]
Class A5 Mortgage Backed Floating Rate Notes due July 2039
• (P)Aa2 (sf) /Aaa.za (sf) to the ZAR [240,000,000]
Class A6 Mortgage Backed Floating Rate Notes due July 2039
• (P)Aa2 (sf) /Aaa.za (sf) to the ZAR [600,000,000]
Class A7 Mortgage Backed Floating Rate Notes due July 2039
• (P)Baa2 (sf) /A2.za (sf) to the ZAR [51,480,000]
Class B2 Mortgage Backed Floating Rate Notes due July 2039
• (P)Ba3 (sf) /Baa3.za (sf) to the ZAR [55,080,000]
Class C2 Mortgage Backed Floating Rate Notes due July 2039
Moody's has not rated the ZAR [14,760,000] Class
D2 Mortgage Backed Floating Rate Notes due July 2039.
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 endeavour to assign a
definitive rating to the above notes. A definitive rating may differ
from a provisional rating.
RATINGS RATIONALE
This rating action relates to the issuance of ZAR [1,200] Million
of new notes that rank pari-passu with each existing class of notes
issued by Thekwini 9. The total notes will increase to ZAR [2,800]
million. Thekwini 9 originally closed in July 2011 and represents
the ninth public term securitisation of South African residential mortgage
loans originated by SA Home Homes Loans (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 [2.25]% and the MILAN
Aaa required Credit Enhancement of [11.0]% 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 July 2000.
The key driver for the MILAN Aaa Credit Enhancement number is the current
level of self employed ([18.0]%), non-owner
occupied properties ([9.0%]) and "Edge" home loan product
([24.2]%). Additionally the structure allows
for the funding of new mortgage loans (until [18 January 2014]),
further advances or further loans (until [18 July 2016]) to existing
borrowers, subject to portfolio limits, notably (i) the weighted-average
loan-to-value (LTV) of [65.1]% (currently
[63.6]%); (ii) self employed limit of [22.0]%;
and (iii) non-owner occupied limit of [10]% and "Edge"
home loan product limit of [25]%.
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) [25]% exposure to
"Edge" home loan product; (iv) benchmarking with comparable transactions
in the South Africa RMBS market; and (v) current economic environment
in South Africa.
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 [2.25]% of current balance to [6.75]%
of current balance and the MILAN Aaa CE increased from [11.0]%
to [17.6]%, the model output indicates that the
Class A1, A2, A3 and A4 notes would have been Aa2/Aaa.za,
Aa2/Aaa.za, Ba1/Baa1.za and Ba1/Baa1.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 methodologies used in this rating were Moody's Approach to Rating
RMBS in Europe, Middle East, and Africa published in October
2009, 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. Please see the Credit Policy page on
www.moodys.com for a copy of these methodologies.
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
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments in this transaction.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Anthony Parry
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Michelangelo Margaria
VP - Senior Credit Officer
Structured Finance Group
Telephone:+39-02-9148-1100
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns provisional ratings to South African RMBS issued by The Thekwini Fund 9 (Pty) Ltd
