Feb 19 - Fitch Ratings has affirmed Thekwini Warehousing Conduit (RF)
Limited's (Thekwini) three classes of commercial paper (CP) National Short-term
Ratings at 'F1+(zaf)', 'F1(zaf)' and 'F2(zaf)', respectively. Thekwini is a CP
conduit that warehouses mortgage assets originated by SA Home Loans (Pty) Ltd
(SAHL, not rated).
The affirmation follows a review of proposed amendments by Standard Bank of
South Africa ('SBSA', 'AA(zaf)'/Stable/'F1+(zaf)'), the arranger and
administrator, and the annual review of the conduit's performance.
The proposed amendments include changes to the portfolio covenants as well as
other amendments as part of the debt listing requirements by the Johannesburg
Stock Exchange. The amended portfolio covenants are: maximum weighted average
portfolio LTV of 70%, maximum payment-to-income ratio of 25%, concentration
limit of 1.5% for the top 10 obligors and a minimum portfolio yield of 1.9%. The
amendments also include a 20% limit on the interest only (IO) and Edge loan
products within the securitised portfolio. Edge loans were launched in 2010 and
have a mixed payment profile of IO payments during the first three years and
Fitch views Edge and IO loans as slightly riskier and has maintained the
additional stress already applied to the Edge product, and extended it to the
combined IO and Edge limit of (20%).
Overall, Fitch has reviewed the amendments and determined the proposed changes
will not impact the CP ratings.
Fitch relied on mortgage data on all mortgages originated by SAHL from 1999 to
2011 to assess Thekwini's roll rates. The roll rate is one of the key
determinants of the credit enhancement (CE) for Thekwini. The CE calculation
also incorporates the buy-back of defaulted assets at 60% of par value by SBSA
under its committed non-performing loan (NPL) facility.
The roll rate is rating scenario dependent. For the 'F1+' rating stress, the
Thekwini roll rate is 4.7% for performing loans, 47% for loans less than 30 days
in arrears and 100% for loans more than 30 days in arrears. Applying the above
roll rates to the arrears buckets from Thekwini's January 2013 investor report,
the required CE according to the transaction documents is 3.25%. This CE figure
is calculated as: (i) the sum product of the percentage of loans in each arrears
bucket and the 'F1+' roll rate less (ii) the product of 60% and the lower of (i)
and the unutilised NPL facility to account for loans that will be repurchased
under the NPL facility.
Finally, the 3.25% required CE is compared with the current available CE of
3.50% for the senior CP notes to test the ability of the CP notes to withstand
an 'F1+' rating stress.
Fitch is comfortable that current ratings reflect the credit quality of each
class of notes, as implied by the CE calculations stipulated in the transaction
documentation given its analysis of the historical loan performance.
The transaction's performance has been in line with Fitch's expectations to date
and there has not been any programme wind down event. Fitch conducted an on-site
review of SAHL and SBSA in November 2012. The review covered a discussion with
the conduit management team and updates on commercial paper issuance, IT
administration systems, administrative procedures, credit policies and portfolio
composition. The team charged with administration of the programme has been
stable and is experienced in administering conduits.
As of January 2013, Thekwini had a total ZAR3.2bn CP notes outstanding, split
between ZAR3.17bn CP notes rated 'F1+(zaf)', ZAR17m notes rated 'F1(zaf)' and
ZAR11.4m notes rated 'F2(zaf)'. The conduit also benefits from
overcollateralisation of ZAR82m funded in the form of a subordinated loan.
Thekwini is a single-seller ABCP conduit backed by mortgage loans originated by
SAHL. The conduit issues various tranches of notes to fund the purchase of
Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Sources of information: investor reports, mortgage data provided by SAHL 1999 to
2011, transaction documents
Applicable criteria: 'Global Rating Criteria for Asset-Backed Commercial Paper',
published on 8 November 2012 and available on www.fitchratings.com.
Applicable Criteria and Related Research:
2013 Outlook: South African Securitisations
Global Rating Criteria for Asset-Backed Commercial Paper