Mmela Mobility Finance (RF) Limited – New Ratings Accorded

14 Jul 2017 In Rating Notifications

Mmela Mobility Finance (RF) Limited – New Ratings Accorded

Johannesburg, 14 July 2017—Global Credit Ratings (“GCR”) has accorded the following final, public long-term credit ratings to the following Notes to be issued by Mmela Mobility Finance (RF) Ltd (“the Issuer” and “the Transaction”):

Secured Class A Notes, stock code MMF101;
R356,000,000;
AAA(ZA)(sf)
Stable Outlook;
Secured Class B Notes, stock code MMF201;
R52,000,000;
A-(ZA)(sf)
Stable Outlook; and
Secured Class C Notes, stock code MMF301;
R19,000,000;
BB-(ZA)(sf)
Stable Outlook.

The Transaction has Class D Notes of R8,000,000 that are unrated and held by Mmela Financial Services (Pty) Ltd (“MFS”).

The final, public credit ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal, whilst the ratings on all other securities relate to ultimate payment of interest and ultimate payment of principal. 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

Mmela Mobility Finance (RF) Ltd (“MMF”) is a R3bn Auto Loan Asset-Backed Note Programme that was approved by the JSE on 7 July 2017. The proceeds of the initial issuance will be used to purchase participating assets, being Auto Loan Instalment Sales Agreements (“ISA”) from On-The-Go Vehicle Finance (RF) Ltd, an Approved Seller that is an existing securitisation. MMF is in its revolving phase and new assets will be purchased under the 2015 RT68 Contract.

MFS was awarded the RT68 Contracts (2010 and 2015) by the National Department of Transport, acting through National Treasury, for the provision of finance and administration of a Subsidised Motor Transport Scheme.

The Originator and Seller of this Transaction is Mmela Motor Scheme (RF) Ltd (“MMS”) - registered under the National Credit Act (NCRCP6417). MMS will enter into an origination agreement with MFS (unrated) in terms of which it will order Vehicles and originate ISA on behalf of MFS in terms of the awarded Subsidised Motor Transport Scheme.

The vehicles, acquired through the RT57 Vehicle Procurement Contract, are limited to Passenger Vehicles, new light passenger vehicle (with a maximum weight of 5,500 kg), but excluding motor bikes, caravans, boats and other leisure luxury and exotic vehicles and shall specifically exclude taxis, heavy commercial vehicles and yellow metal vehicles. GCR has been advised that the Vehicles are generally acquired at c.20% below retail market price. GCR has not factored this in the applied recovery rates.

The scheme rules, through the RT68 Contract, are limited only to government employees that hold the position of Deputy Director Level or below and are required to travel extensively (at least 70% for official business) by road for business purposes (school inspectors, social workers, etc.). The RT57 vehicles are a working tool and not a service benefit.

The scheme rules, through the RT68 Contract, do not allow for risk based pricing. Therefore a Preferential Interest Rate of Prime less 1.10%, which is a condition of the RT68 Contract, is applied to the ISA. The majority (99.08%) of the assets have government payroll deduction, resulting in low historic defaults. None of the assets have residual/balloon payments.

The Transaction does not have any reserves (at Closing Date), facilities or swaps applicable however, an Arrears Reserve will be accrued and determined on any Determination Date to be 50% of the aggregate of the Principal Balance of all Defaulted Participating Assets.

The Transaction does not have any explicit portfolio covenants. However, a Default Trigger Event and an Excess Spread Trigger Event is present in the Transaction.

RATING SENSITIVITY

Security class
Long-term Rating
25%
Increase in Defaults
50%
Increase in Defaults
25% Decrease in Recoveries
50% Decrease in Recoveries
25% Increase in Defaults and 25% Decrease in Recoveries
50% Increase in Defaults and 50% Decrease in Recoveries
Secured Class A Notes
AAA(ZA)(sf)
AA+(ZA)(sf)
AA(ZA)(sf)
AAA(ZA)(sf)
AAA(ZA)(sf)
AA(ZA)(sf)
AA-(ZA)(sf)
Secured Class B Notes
A-(ZA)(sf)
BBB+(ZA)(sf)
BBB(ZA)(sf)
A-(ZA)(sf
A-(ZA)(sf
BBB(ZA)(sf)
BBB-(ZA)(sf)
Secured Class C Notes
BB-(ZA)(sf)
B+(ZA)(sf)
(ZA)(sf)
BB-(ZA)(sf)
BB-(ZA)(sf)
B(ZA)(sf)
(ZA)(sf)

 

RATINGS HISTORY

Security class
Stock code
Initial and Last Rating
Long-term Rating
Short-term Rating
Outlook
Secured Class A Notes
MMF101
14 July 2017
AAA(ZA)(sf)
n.a
Stable
Secured Class B Notes
MMF201
14 July 2017
A-(ZA)(sf)
n.a
Stable
Secured Class C Notes
MMF301
14 July 2017
BB-(ZA)(sf)
n.a
Stable

 

ANALYTICAL CONTACTS

Corné Els

Senior Structured Finance Analyst

+27 11 784 1771

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

 

Rishentra Naidoo

Senior Structured Finance Analyst

+27 11 784 1771

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

Committee Chairperson

Emma-Jane Fulcher

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,

Consumer Asset Backed Securitisation Rating Criteria - May ’17,

Global Master Criteria for Rating Banks and Other Financial Institutions - Mar ’17,

Nedbank Ltd Financial Institutions Rating Report - May ’17,

ABSA Bank Ltd Financial Institutions Rating Report - May ’17, and

Standard Bank of South Africa Ltd Financial Institutions Rating Report - May ’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
Administration A debtor unable to pay a judgement of debt or who cannot meet its financial obligations and does not have sufficient realisable assets that can be attached in satisfaction of judgement or obligations. The debtor can apply for an administration order interims of the Magistrates’ Court Act 32 of 1944 (South Africa).
Agreement A negotiated and usually legally enforceable understanding between two or more legally competent parties.
Arrears General term for non-performing obligations, i.e. obligations that are overdue.
Arrears Reserve An accounting provision made in a reserve fund for arrears.
Asset An item with economic value that an entity owns or controls.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
Credit A contractual agreement in which a borrower receives something of value now, and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
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.
Excess Spread The net weighted average interest rate receivable on a pool of assets being greater than the weighted average interest rate payable for the debt securities.
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.
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.
Market An assessment of the property value, with the value being compared to similar properties in the area.
National Credit Act The National Credit Act 34 of 2005 (South Africa).
Origination A process of creating assets.
Originator An entity that created assets and hold on balance sheet for securitisation purposes.
Pricing A process of determining the price of a debt security.
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.
Provision An amount set aside for expected losses to be incurred by a creditor.
Recovery The action or process of regaining possession or control of something lost. To recoup losses.
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.
Reserves A portion of funds allocated for an eventuality.
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.
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.
Spread The interest rate that is paid in addition to the reference rate for debt securities.
Stock Code A unique code allocated to a publicly listed security.
Swap An agreement between two parties for the exchange of a series of future cash flows. The exchange of one security for another. Normally an investment bank, which provides a swap.
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.
Trigger Event An event caused by transactional performance or environmental changes that would impact a transaction.
Ultimate Payment A measure of the principal debt, interest, fees and expenses being repaid over a period of time determined by recoveries.

For a detailed glossary of terms utilised in this announcement 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 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 ratings 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 ratings have been disclosed to the Arranger with no contestation of the ratings.

GCR has received the following: Pool cut at 31 December 2016, 31 March 2017 and 31 May 2017; Static Losses; Static Recoveries; Programme Memorandum; Applicable Pricing Supplements; Account Bank Agreement; Administration Agreement; Common Terms Agreement; Deed of Cession & Pledge; Deed of Suretyship; Issuer Indemnity; Issuer Owner Trust Suretyship; Origination Agreement; Preference Share Subscription Agreement; Sale Agreement; Security Cession for the Collections Account; Security Cession for the Rights, Interests and Assets; Security SPV Guarantee; Settlement and Servicing Agreement.

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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2013 Global Credit Rating Co (Pty) Ltd. INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.