iMpumelelo CP Note Programme 1 (RF) Ltd – Series 1 Notes, Rating Affirmed
Johannesburg, 10 March 2017—Global Credit Ratings (“GCR”) has affirmed the final, public short term credit rating of ‘A1+(ZA)(sf)’ accorded to the Senior Secured ABCP Series 1 Notes (the “Notes”) issued and to be issued by iMpumelelo CP Note Programme 1 (RF) Ltd (“iMpumelelo” or the “Issuer”) under Series 1 of its R10bn Serialised Note Programme.
The iMpumelelo Serialised Note Programme (the “Programme”) is registered with the Johannesburg Stock Exchange, under the Commercial Paper Regulations. The Issuer may issue listed and unlisted Notes. The ‘A1+(ZA)(sf)’ rating accorded to the Series 1 Notes in issue and to be issued is the highest short term rating on the national scale.
The Notes in issue and to be issued under Series 1 of the Programme are administered by Absa Corporate and Investment Bank, a division of Absa Bank Limited (“Absa”). The proceeds from the issuance of the Notes currently in issue were used to acquire underlying assets. The Series 1 Notes and Acquired Assets are segregated from any obligations or claims arising out of any other Series under the Programme. In addition to issuing Notes with a maturity of less than one year, the Issuer is able to issue Notes with a tenor greater than one year but up to a maximum of ten years.
The Series 1 Notes are fully supported by an irrevocable and unconditional guarantee issued by Absa (the “Absa Guarantee”) to the Series 1 Noteholders. The Absa Guarantee is specific to Series 1 and covers the Series 1 Noteholders (including Medium Term Notes Noteholders) against any losses arising out of an Event of Default or a breach by the Issuer of any of its obligations under the Transaction Documents. The Absa Guarantee also covers against a liquidity shortfall due to a payment mismatch, as well as losses associated with the default of any of the Acquired Assets.
Due to the fully supported nature of the Series 1 Notes under the Absa Guarantee, the rating of the Notes is derived from the credit rating of Absa, as Guarantor for Series 1. The current credit ratings of Absa are ‘AA+(ZA)’ and ‘A1+(ZA)’ on the long term and short term national scale respectively, with a Negative outlook. The ratings were affirmed by GCR in April 2016. The Notes are thus accorded a rating of ‘A1+(ZA)(sf)’. The ‘A1+(ZA)(sf)’ rating of the Notes excludes the MTN Notes, which can have a maturity of more than one year. GCR expects to be notified sufficiently in advance should the Issuer wish to issue MTN Notes. Although the rating of the Notes issued and to be issued under Series 1 is not dependent on the Acquired Assets, GCR expects to be notified in advance prior to the purchase of any additional Series 1 Assets. Should the short term rating of Absa change, it is likely that the rating of the Notes will also change.
The rating accorded to the Series 1 Notes relates to timely payment of interest and principal. The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties. In the event that the national short term rating of Absa is downgraded or withdrawn, or if the sovereign rating is downgraded or withdrawn, the rating of the Notes 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 iMpumelelo CP Note Programme 1 (RF) Limited New Rating Report published in March 2016, as well as the Surveillance Report published on 10 March 2017.
NATIONAL SCALE RATINGS HISTORY
|ABCP – Series 1|
|ABCP – Series 1|
+27 11 784 1771
+27 11 784 1771
Sector Head: Structured Finance Ratings
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structured Finance Rating Criteria – Feb ’17;
Global Asset Backed Commercial Paper Rating Criteria – Sep ’16;
Global Master Criteria for Rating Banks and Other Financial Institutions – Mar ’16; and
Absa Bank Limited Credit Rating Report – Apr ’16.
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
|Advance||A lending term, to transfer funds from the creditor to the debtor.|
|Asset||An item with economic value that an entity owns or controls.|
|Claim||A formal request or demand.|
|Commercial Paper||A debt security of short term nature, less than a year.|
|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 X days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.|
|Downgrade||The assignment of a lower credit rating to a corporate, sovereign of debt instrument by a credit rating agency. Opposite of upgrade.|
|Guarantee||An undertaking for performance of another’s obligations in event of default.|
|Guarantor||A party that gives the guarantee.|
|Irrevocable||Not able to be changed, reversed, recovered and final.|
|Issuer||The party indebted or the person making repayments for its borrowings.|
|Junior||A security that has a lower repayment priority than senior securities.|
|Liquidity||The ability to repay short-term obligations or short-term availability of liquid assets to a market or entity.|
|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.|
|Loss||A tangible or intangible, financial or non-financial loss of economic value.|
|Medium Term Notes||Debt securities with a tenor ranging from 3 months to 15 years.|
|National Scale Rating||The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.|
|Noteholder||Investor of capital market securities.|
|Obligation||The title given to the legal relationship that exists between parties to an agreement when they acquire personal rights against each other for entitlement to perform.|
|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).|
|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.|
|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.|
|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.|
|Surveillance||Process of monitoring a transaction according to triggers, covenants and key performance indicators.|
|Tenor||The term or duration of a debt security.|
|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.|
|Unconditional||Not subject to any conditions.|
SALIENT FEATURES OF INDICATIVE RATINGS ACCORDED
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating 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 credit rating has been disclosed to the Arranger with no contestation of the rating.
The information received from the Arranger and other reliable third parties to accord the credit rating included the final, signed and executed copies of the Transaction Documents including the Absa Guarantee, as well as the monthly investor reports from August 2015 to January 2017.
The rating above was solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the rating.