London, 22 October 2012 -- Moody's Investors Service has today assigned provisional credit ratings
to the following classes of notes to be issued by The Thekwini Fund 10
(RF) Ltd (Thekwini 10):
- Rand[396.0]M Class A4 Mortgage Backed Floating Rate
Notes due October 2038, Assigned (P)A1 (sf)/(P)Aaa.za (sf)
- Rand[554.0]M Class A5 Mortgage Backed Floating Rate
Notes due October 2038, Assigned (P)A1 (sf)/(P)Aaa.za (sf)
- Rand[100.0]M Class A6 Mortgage Backed Fixed Rate
Notes due October 2038, Assigned (P)A1 (sf)/(P)Aaa.za (sf)
- Rand[70]M Class B2 Mortgage Backed Floating Rate Notes due
October 2038, Assigned (P)Baa3 (sf)/(P)A2.za (sf)
- Rand[47.2]M Class C2 Mortgage Backed Floating Rate
Notes due October 2038, Assigned (P)Ba3 (sf)/(P)Baa3.za (sf)
Moody's has not rated the Rand[32.8]M Class D2 Mortgage Backed
Floating Rate Notes due October 2038.
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 10. The total notes will increase to ZAR [3.000]
million. The transaction represents the eleventh term securitisation
of South African residential mortgage loans originated by SA Home Loans
(Pty) Ltd ("SAHL") (not rated). The assets supporting the notes
are prime mortgage loans secured on residential properties located in
South Africa. SAHL is the servicer and administrator and the Standard
Bank of South Africa ("SBSA")(A3 /P-2) is the back-up servicer
and administrator.
A unique feature for this transaction, which differs from previous
Thekwini transactions, relates to the Class A3 & A6 note which
will initially pay a fixed rate coupon up to the IPD in July 2017.
It will then switch to a floating rate linked to 3 month JIBAR.
SBSA will provide a interest rate swap between the foating rate due on
the mortgage loans and the fixed rate payable on these notes. Furthermore
the Class A2/A4 and A3/A6 notes will pay principal sequentially until
the IPD in July 2017 when they will switch to pro-rata principal
payments. In addition the account bank and swap counterparty triggers
have been lowered when compared to previous Thekwini transactions.
As such the Ratings of this transaction will exhibit a greater linkage
to the ratings of Standard Bank than previous transactions.
The ratings are primarily based on the credit quality of the portfolio,
its diversity, the structural features of the transaction and its
legal integrity. From the assessment of the credit quality of the
underlying mortgage loan pool, Moody's determined the portfolio
expected loss of [2.5]% and MILAN Credit Enhancement
(CE) of [11]%.
MILAN CE of 11.0%: is lower than the sector average
and is primarily due to (i) current weighted average LTV [67.8]%;
(ii) relatively short revolving period allowing for the addition of new
mortgage loans for 6 months from close; (iii) [17.6]%
of self employed borrowers; (iv) [9.5]% of "Edge"
mortgage loans which have an initial interest-only period;
and (v) [9.5]% of non-owner occupied mortgage
loans.
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) 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 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 [2.5]% of current balance to [5.0]%
of current balance and the MILAN CE was maintained at [11.0]%,
the model output indicates that the Class A4, A5 and A6 notes would
have been Aaa.za, 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.
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 Methodology
published in October 2012 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings".
The principal methodology used in this rating was Moody's Approach to
Rating RMBS in Europe, Middle East, and Africa published in
June 2012. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
In rating this transaction, Moody's used ABSROM to model the cash
flows and determine the loss for each tranche. The cash flow model
evaluates all default scenarios that are then weighted considering the
probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding
loss for each class of notes is calculated given the incoming cash flows
from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and
(ii) the loss derived from the cash flow model in each default scenario
for each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
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.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF299880.
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
two 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 the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
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.
John Paul Truijens
Asst Vice President - 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 The Thekwini Fund 10 (RF) Ltd
