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Rating Action:

Moody's takes rating actions on Transsec 3 (RF) Limited and Transsec 4 (RF) Limited, following downgrade of South Africa's sovereign ratings

03 Apr 2020

Madrid, April 03, 2020 -- Moody's Investors Service ("Moody's") has today downgraded the global scale ratings (GSRs) of 11 notes in Transsec 3 (RF) Limited (Transsec 3) and Transsec 4 (RF) Limited (Transsec 4), and placed them under review for further downgrade. Moody's has also placed other 5 GSRs under review for downgrade, including one short-term rating, and affirmed one short-term GSR. In addition, Moody's has affirmed the national scale rating (NSRs) of 12 notes, including one short-term rating, and placed under review for downgrade the NSRs of 5 notes, including one short-term NSR, as a result of the corresponding GSRs being also under review for further downgrade and the revisions to the NSR map following the downgrade of the sovereign debt rating of the Government of South Africa.

Additionally, Moody's has also placed under review for downgrade the ratings in these two transactions given the negative effect due to the economic disruption caused by the coronavirus outbreak.

LIST OF AFFECTED RATINGS:

Issuer: Transsec 3 (RF) Limited

....ZAR 179M Class A2 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Jan 13, 2020 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 166M Class A3 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Jan 13, 2020 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 74M Class A4 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Jan 13, 2020 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 173M Class A6 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Jan 13, 2020 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 104M Class A7 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Jan 13, 2020 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 90M Class B (2017) Notes, Baa3 (sf) Placed Under Review for Possible Downgrade / Aa1.za (sf) Placed Under Review for Possible Downgrade; previously on Jan 13, 2020 Upgraded to Baa3 (sf) / Upgraded Aa1.za (sf)

....ZAR 84M Class B Notes, Baa3 (sf) Placed Under Review for Possible Downgrade / Aa1.za (sf) Placed Under Review for Possible Downgrade; previously on Jan 13, 2020 Upgraded to Baa3 (sf) / Upgraded to Aa1.za (sf)

Issuer: Transsec 4 (RF) Limited

....ZAR 107M Class A1 Notes, Affirmed P-3 (sf) / Affirmed P-1.za (sf); previously on Oct 29, 2019 Affirmed P-3 (sf) / Affirmed P-1.za (sf)

....ZAR 300M Class A2 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Oct 29, 2019 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 221M Class A3 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Oct 29, 2019 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 92M Class A4 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Oct 29, 2019 Affirmed A2 (sf) / Affirmed Aaa.za (sf)

....ZAR 88M Class A5 Notes, P-3 (sf) Placed Under Review for Possible Downgrade / P-1.za (sf) Placed Under Review for Possible Downgrade; previously on Oct 29, 2019 Definitive Rating Assigned P-3 (sf) / Assigned P-1.za (sf)

....ZAR 270M Class A6 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Oct 29, 2019 Definitive Rating Assigned A2 (sf) / Assigned Aaa.za (sf)

....ZAR 81M Class A7 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Oct 29, 2019 Definitive Rating Assigned A2 (sf) / Assigned Aaa.za (sf)

....ZAR 62M Class A8 Notes, Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade / Affirmed Aaa.za (sf); previously on Oct 29, 2019 Definitive Rating Assigned A2 (sf) / Assigned Aaa.za (sf)

....ZAR 160M Class B Notes, Ba1 (sf) Placed Under Review for Possible Downgrade / Aa3.za (sf) Placed Under Review for Possible Downgrade; previously on Oct 29, 2019 Affirmed Ba1 (sf) / Affirmed Aa3.za (sf)

....ZAR 102M Class B2 Notes, Ba1 (sf) Placed Under Review for Possible Downgrade / Aa3.za (sf) Placed Under Review for Possible Downgrade; previously on Oct 29, 2019 Definitive Rating Assigned Ba1 (sf) / Assigned Aa3.za (sf)

RATINGS RATIONALE

The rating actions are prompted by the lowering of the South Africa local-currency country ceiling to A3 from A2. Today's rating action follows the downgrade of South Africa's sovereign rating to Ba1 from Baa3 on 27 March 2020 as a result of the weakening of the South African government's credit profile (https://www.moodys.com/research/--PR_420630).

The rating actions are also prompted by the NSR map following the downgrade to the sovereign debt rating for the Government of South Africa.

Our analysis has considered the increased uncertainty relating to the effect of the coronavirus outbreak on the South African economy as well as the effects that the announced government measures put in place to contain the virus, will have on the performance of small businesses. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. It is a global health shock, which makes it extremely difficult to provide an economic assessment. The degree of uncertainty around our forecasts is unusually high.

Moody's has also placed under review for further downgrade the ratings in these two transactions given the increased uncertainties due to the lockdown of South Africa. The securitised assets are made up of instalment sale agreements extended by SA Taxi Holdings (Pty) Ltd (SA Taxi) through Potpale Investments (RF) (Pty) Ltd to obligors located in South Africa. The obligors are minibus taxi operators classified as commercial small, medium- and micro-sized enterprises. The South African government's lockdown for 21 days to slow the spread of the coronavirus will constrain these operators' abilities to repay their credits.

Moody's has placed on review for downgrade the short-term ratings of Class A5 notes in Transsec 4 (P-3 (sf) / P-1.za (sf)) taking into consideration the potential impact on available liquidity as a result of the lockdown. Moody's has affirmed Class A1 rating in Transsec 4 (P-3 (sf)/P-1.za (sf)) given enough cash flow expected, together with the liquidity facility size, for total repayment at maturity date on April 2020.

Increased Country Risk

The rating action follows Moody's downgrade of the long-term issuer and senior unsecured ratings of the Government of South Africa to Ba1 from Baa3. The outlook remains negative. South Africa's long-term local currency bond and deposit ceilings were lowered to A3 from A2. As a result, the maximum achievable ratings for structured finance transactions backed by South African receivables is lowered to A3 (sf) from A2 (sf).

For additional information on the sovereign action, please refer to the related announcement "Moody's downgrades South Africa's ratings to Ba1, maintains negative outlook" (https://www.moodys.com/research/--PR_420630), published on 27 March 2020.

Counterparty Exposure

Today's rating action also took into consideration the notes' exposure to The Standard Bank of South Africa Limited as liquidity provider, account bank or swap provider.

On 31 March 2020, Moody's downgraded to Ba1 (negative outlook) from Baa3, the long-term local- and foreign-currency deposit ratings of The Standard Bank of South Africa Limited, key counterparty in the two transactions, following the downgrade of the sovereign rating. For additional information on the South African banks' action, please refer to the related announcement "Moody's downgrades the ratings of five South African banks following downgrade on the South African sovereign. The outlook is negative," (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_421431), published on 31 March 2020. As a result, Moody's incorporated current counterparty ratings in its analysis.

The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111163. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

Factors or circumstances that could lead to an upgrade of the ratings include: (1) performance of the underlying collateral that is better than Moody's expected; (2) deleveraging of the capital structure; (3) improvements in the credit quality of the transaction counterparties; and (4) a decrease in sovereign risk.

Factors or circumstances that could lead to a downgrade of the ratings include: (1) an increase in sovereign risk; (2) performance of the underlying collateral that is worse than Moody's expected; (3) deterioration in the notes' available credit enhancement; and (4) deterioration in the credit quality of the transaction counterparties.

Moody's National Scale Credit 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 credit 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 credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to one of the credit rating outcomes announced and described above.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Antonio Tena
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Masako Oshima
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

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