Commissioner Street No. 10 (RF) Ltd – Indicative Ratings Accorded

16 Mar 2017 In Rating Notifications

Commissioner Street No. 10 (RF) Ltd – Indicative Ratings Accorded

Johannesburg, 16 March 2017—Global Credit Ratings (“GCR”) has accorded indicative, public long term credit ratings to the following senior secured credit linked notes (the “Notes”) to be issued by Commissioner Street No. 10 (RF) Ltd (the “Issuer”):

  • R500m Series 1 Notes, due 3 April 2018, AA(ZA)(sf) with a Stable outlook;
  • R750m Series 2 Notes, due 11 December 2020, AA-(ZA)(sf) with a Stable outlook;
  • R700m Series 3 Notes, due 10 August 2021, AA(ZA)(sf) with a Stable outlook.

The rating accorded to the Notes relates to timely payment of interest and ultimate payment of principal. The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties.

RATING RATIONALE

The Notes will be issued in three separate Series, whereby the assets and liabilities in relation to each Series are ring fenced, such that the Noteholders in respect of any Series of Notes will have no recourse to the assets from any other Series of Notes. Each Series of Notes will be issued in accordance with the terms and conditions stipulated in the respective Applicable Series Transaction Supplement.

The aggregate amount of Notes to be issued by the Issuer may not exceed the sum of the amounts stipulated in the Commissioner Street Master Programme Memorandum, as read in conjunction with the Applicable Issuer Supplement and the respective Applicable Series Transaction Supplements for the Series of Notes to be issued. The cumulative amount to be issued by the Issuer on the closing date (the “Transaction” and each “Series Transaction”) is R1.95bn, unless a higher limit is approved by the relevant transaction parties.

The underlying security (the “Finance Assets”) in relation to the Transaction is the rights, title and interest in loans provided by Absa to the respective Series 1 Borrower (Land and Agricultural Development Bank of South Africa), Series 2 Borrower (Telkom SA SOC Ltd) and Series 3 Borrower (Industrial Development Corporation) (collectively referred to as the “Borrowers”). The Issuer will utilise the proceeds from the issuance of the Notes to fund the purchase of the Finance Assets in respect of each Series, in accordance with the terms of the respective Sale Agreements.

The performance of the Notes is credit linked to the ability of each respective Borrower to make the payments due in respect of the Finance Assets. As such, GCR uses a look through approach to the long term unsecured ratings of the underlying Borrowers in respect of each Series. GCR relied on externally available public credit ratings in its analysis in accordance with GCR’s credit-linked notes and repackaging vehicle rating criteria, in order to determine the rating of each Series of Notes to be issued.

In the event that the national long term rating or the national senior unsecured rating of the Issuer may be amended or withdrawn, or if the sovereign rating be amended or withdrawn, the Credit Linked Notes’ rating may follow suit. The rating of the Notes may also change if relevant risk presenting entities are not considered to be of sufficient credit quality anymore and no appropriate remedial action is undertaken when necessary. For more information please refer to the Commissioner Street No. 10 (RF) Ltd Pre-funding Report to be published on 16 March 2017.

 

RATINGS HISTORY

Stock code
Stock code
Initial/Last rating
Long term rating
Short term rating
Outlook
Series 1 Notes
CS001
16 March 2017
AA(ZA)(sf)
n.a
Stable
Series 2 Notes
CS002
16 March 2017
AA-(ZA)(sf)
n.a
Stable
Series 3 Notes
CS003
16 March 2017
AA(ZA)(sf)
n.a
Stable

ANALYTICAL CONTACTS

Mark Vrdoljak

Senior Credit Analyst

+27 11 784 1771

.(JavaScript must be enabled to view this email address)

Tinashe Mujuru

Junior Analyst

+27 11 784 1771

.(JavaScript must be enabled to view this email address)

Committee Chairperson

Emma-Jane Fulcher

Head of Structured Finance

+27 11 784 1771

.(JavaScript must be enabled to view this email address)

 

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Structured Finance Rating Criteria – Feb ’17;

Global Credit-Linked Note and Repackaging Vehicle Rating Criteria – May ’16;

Criteria for Rating Banks and Other Financial Institutions – Mar’16;

Criteria for Rating Corporate Entities – Feb ’17; and

With reference to publicly available credit ratings for the Land Bank, Telkom and the IDC.

 

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: http://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK:  http://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT http://GLOBALRATINGS.NET.

 

 

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S STRUCTURED FINANCE GLOSSARY
Agreement A negotiated and usually legally enforceable understanding between two or more legally competent parties.
Asset An item with economic value that an entity owns or controls.
Borrower The party indebted or the person making repayments for its borrowings.
Downgrade The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.
International Scale Rating LC International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.
Issuer The party indebted or the person making repayments for its borrowings.
Junior A security that has a lower repayment priority than senior securities.
Loan A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.
Long-Term Rating A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.
Noteholder Investor of capital market securities.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Proceeds Funds from issuance of debt securities or sale of assets.
Rating Outlook A Rating outlook indicates the potential direction of a rated entity’s rating over the medium term, typically one to two years. An outlook may be defined as: ‘Stable’ (nothing to suggest that the rating will change), ‘Positive’ (the rating symbol may be raised), ‘Negative’ (the rating symbol may be lowered) or ‘Evolving’ (the rating symbol may be raised or lowered).
Recourse A source of help in a difficult situation.
Repack Rearrangement of securities with the intent to be more attractive for investment. Junior tranches (that have a higher degree of default risk) of a securitisation transactions that have been repackaged into separate debt securities (according to their degree of risk) that utilise credit-enhancement techniques to mitigate the risk. A CDO is created to distribute the prepayment risk amongst different classes of Notes.
Repayment Payment made to honour obligations in regards to a credit agreement in the following credited order: 3.) Satisfy the due or unpaid interest charges; 4.) Satisfy the due or unpaid fees or charges; and 5.) To reduce the amount of the principal debt.
Security An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.
Senior A security that has a higher repayment priority than junior securities.
Short-Term Rating A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.
Stock Code A unique code allocated to a publicly listed security.
Structured Finance A method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk.
Timely Payment The principal debt, interest, fees and expenses being repaid promptly in accordance with the contractual obligation.
Transaction A transaction that enables an Issuer to issue debt securities in the capital markets. A debt issuance programme that allows an Issuer the continued and flexible issuance of several types of securities in accordance with the programme terms and conditions.
   

For a detailed glossary of terms utilised in this announcement please click here

SALIENT FEATURES OF INDICATIVE RATINGS ACCORDED

GCR affirms that a.) no part of the ratings was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The ratings above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.

The credit ratings have been disclosed to the Arranger with no contestation of the ratings.

The information received from the Arranger and other reliable third parties to accord the credit ratings included the Commissioner Street Master Programme Memorandum; final signed IDC term loan facility agreement; final signed Telkom term loan facility agreement; final signed Land Bank term loan facility agreement; draft Applicable Issuer Supplement; draft Applicable Series Transaction Supplement; draft Administration Agreement; draft Bank Agreement; draft Common Terms Agreement; draft Guarantee Custody Agreement; draft Issuer Indemnity; draft Note Subscription Agreement; draft Programme Agreement; draft Security Cession; draft Security SPV Guarantee; and draft Transfer Agency Agreement.

 

 

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GLOBALRATINGS.NET/UNDERSTANDINGRATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GLOBALRATINGS.NET/RATINGSINFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

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