Fox Street 1 (RF) Limited – Ratings Affirmed and Ratings Upgraded

06 Apr 2018 In Rating Notifications

Fox Street 1 (RF) Limited – Ratings Affirmed and Ratings Upgraded

Johannesburg, 6 April 2018—Global Credit Ratings (‘GCR’) has affirmed the following final, public long-term credit ratings accorded to the following Notes issued by Fox Street 1 (RF) Ltd, (‘the Issuer’):

● Class A5 Notes, stock code FS1A5; AAA(ZA)(sf) Stable Outlook.

GCR concurrently upgraded the following final, public long-term credit ratings accorded to the following Notes issued by the Issuer and accorded a Stable Outlook:

● Class B1 Notes, stock code FS1B1; AA+(ZA)(sf) Stable Outlook;

● Class C1 Notes, stock code FS1C1; A+(ZA)(sf) Stable Outlook; and

● Class D1 Notes, stock code FS1D1; BBB+(ZA)(sf) Stable Outlook.

 

The Transaction has a Subordinated Loan of R116,217,883 that is unrated.

The credit ratings accorded to the Class A Notes relate to timely payment of interest on each Quarterly Payment Date and ultimate payment of principal by their Final Redemption Date, whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal by their Final Redemption Date. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.

 

RATING RATIONALE

Fox Street 1 (RF) Limited is a Residential Mortgage Backed Securities (“RMBS”) Securitisation of home loans originated by Investec Bank Limited (“Investec”) to its private banking clients. The Issuer issued the listed Notes on 20 September 2013. This is Investec’s first Fox Street RMBS transaction. Investec previously had other RMBS transactions under the Private Residential Mortgages and Private Mortgages programmes.

The portfolio principal outstanding decreased from R934,300,990 at November 2016 to R819,702,458 at November 2017. GCR calculated an annual net repayment rate of 12.27% for the year ending 30 November 2017.

None of the Transaction’s Trigger Events (e.g. Stop Purchase or Servicer Default) occurred since the initial ratings were accorded in February 2016.

The Transaction had three accounts (R4.1m) in arrears (<3 months) and two accounts (R2.3m) in default (>3 months) at 30 November 2017. These had a Weighted Average Current Loan to Value (“WA CLTV”) of 64.74%. All of these defaults were fully provisioned for through the Principal Deficiency Ledger mechanism.

The Liquidity Reserve, Mortgage Bond Registration Costs Reserve and Redraw Reserve required amounts were maintained. The Administrator used its discretion and applied funds from the Capital Reserve to make principal repayments to noteholders during the quarter ending 28 February 2014, when the Capital Reserve balance was reported as being lower than its required amount. Since then, the Capital Reserve has remained at the same level of R7,580,688, with its required amount being R16,510,551 at 30 November 2017. The transaction documentation allows for such utilisation of Capital Reserve funds at the Administrator’s discretion.

The majority of the properties are situated in Gauteng at 59.5% (Feb ’16: 58.8%) and Western Cape at 26.4% (Feb ’16: 25.6%) of the portfolio principal balance outstanding respectively.

As at November 2017, the home loan portfolio had a WA CLTV ratio of 64.98% (Feb ‘17: 59.9% %) and a Weighted Average Debt to Income ratio of 18.86% (Feb ‘17: 19.7%).

 

 

RATINGS HISTORY

Security class
Stock code
Initial rating
Long-term rating
Outlook
Last rating
Long-term rating
Outlook
Class A5 Notes
FS1A5
15 February 2016
AAA(ZA)(sf)
Stable
16 May 2017
AAA(ZA)(sf)
Stable
Class B1 Notes
FS1B1
15 February 2016
AA-(ZA)(sf)
Stable
16 May 2017
AA(ZA)(sf)
Positive
Class C1 Notes
FS1C1
15 February 2016
BBB+(ZA)(sf)
Stable
16 May 2017
A(ZA)(sf)
Positive
Class D1 Notes
FS1D1
15 February 2016
BB+(ZA)(sf)
Stable
16 May 2017
BBB(ZA)(sf)
Positive

ANALYTICAL CONTACTS

Corné Els

Senior Structured Finance Analyst

+27 11 784 1771

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

Secondary Analyst

Yehuda Markovitz

Structured Finance Analyst

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

Committee Chairman

Yohan Assous

Sector Head: Structured Finance Ratings

+27 11 784 1771

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

 

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Structured Finance Rating Criteria - Feb ’17,

Global Residential Mortgage Backed Securities Rating Criteria - May ’17,

Fox Street 1 (RF) Ltd Surveillance Report - May ’17, and

Investec Bank Limited Financial Institution ratings - Oct ’17

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
Administrator A transaction appointed agent responsible for the managing of a Conduit or a Special Purpose Vehicle. The responsibilities may include maintaining the bank accounts, making payments and monitoring the transaction performance.
Arrears General term for non-performing obligations, i.e. obligations that are overdue.
Bond A long-term debt instrument issued by either: a company, institution or the government to raise funds.
Capital The sum of money that is used to generate proceeds.
Debt An obligation to repay a sum of money.
Default A default occurs when: 1.) The Borrower is unable to repay its debt obligations in full; 2.) A credit-loss event such as charge-off, specific provision or distressed restructuring involving the forgiveness or postponement of obligations; 3.) The borrower is past due more than 90 days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.
Income Money received, especially on a regular basis, for work or through investments.
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.
Liquidity The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity.
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.
Principal Repayments Scheduled payments and prepayments.
Private An issuance of securities without market participation, however, with a select few investors. Placed on a private basis and not in the open market.
Provision An amount set aside for expected losses to be incurred by a creditor.
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.
Reserve Fund A funded account available for use by a Special Purpose Vehicle for one or more specified purposes. A reserve fund is often used as a form of credit enhancement. Typically accumulated over time, through excess cash flows.
Securities Various instruments used in the capital market to raise funds.
Securitisation Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.
Servicer A transaction appointed agent that performs the servicing of mortgage loans, loan or obligations.
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.
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.
Trigger Event An event caused by transactional performance or environmental changes that would impact a transaction.
Weighted The weight that a single obligation has in relation to the aggregated pool of obligations. For example, a single mortgage principal balance divided by the aggregated mortgage pool principal balance.
Weighted Average An average resulting from the multiplication of each component by a factor reflecting its importance or, relative size to a pool of assets or liabilities.
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.
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.
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.

For a detailed glossary, please click here.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the ratings was influenced by any other business activities of the credit rating agency; b.) the ratings was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings was 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 ratings document.

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

The credit rating has been disclosed to the Arranger with no contestation of the rating.

GCR has received the November 2017 pool cut and the quarterly Investor Reports (22 February 2017, 20 May 2017, 22 August 2017 and 21 November 2017) and SENS announcement of 20 February 2018 reference to the quarterly principal payment.

The ratings above were solicited by, or on behalf of the rated client, and therefore, GCR has been compensated for the provision of the ratings.

 

 

 

 

 

 

 

 

 

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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