Fitch: Ikhaya Performance Continues to Deteriorate
Fitch Ratings-London/Johannesburg-29 October 2009: Fitch Ratings Ikhaya 1 RMBS (Pty) Ltd and Ikhaya 2 RMBS (Pty) Ltd have continued to see a rise in their arrears since the negative rating actions were taken on 26 May 2009.
Current three months plus arrears levels for both transactions have reached 7.03% and 8.21%, respectively as of September 2009, up from 3.05% and 3.58% a year ago. Although Fitch has observed a decline in the volume of arrears in lower arrears buckets, the volume remaining in higher buckets is posing a significant concern for the future performance of there transactions. Currently, loans within the 12 months plus bucket have reached 3.47% and 6.23%, respectively, of their current outstanding collateral balances. Fitch expects higher losses for these buckets due to the increased current loan to value ratios for these loans caused by the current low interest rate environment.
Fitch also notes that these transactions feature triggers to protect the credit enhancement levels. For both transactions, arrears reserves have been set up due to the breach of the default trigger set at 0.8%. This reserve is used as an additional support for credit enhancement to cover possible future losses by trapping available excess spread. Even though Ikhaya 2 had a reserve shortfall during Q209 reporting period, currently, both transactions have topped up their arrears reserves to their target levels. However, high arrears levels leading to further increase in defaults are expected to limit the excess spread to cover possible losses in the following quarters.
Fitch will closely monitor the performances of these transactions every quarter. At present, current credit enhancement levels provide enough support for the rated tranches to maintain their current ratings.
Current ratings are as follows:
Ikhaya 1 RMBS (Pty) Ltd:
Class A Series A3 (ISIN ZAG000037722): 'AAA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-1'
Class A Series A4 (ISIN ZAG000037730): 'AAA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-1'
Class A Series A5 (ISIN ZAG000037748): 'AAA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-1'
Class B (ISIN ZAG000037755): 'AA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-3'
Class C (ISIN ZAG000037763): 'A(zaf)'; Outlook Stable; Loss Severity Rating 'LS-3'
Class D (ISIN ZAG000037771): 'BBB(zaf)'; Outlook Negative; Loss Severity Rating 'LS-3'
Ikhaya 2 RMBS (Pty) Ltd:
Class A Series A2 (ISIN ZAG000040635): 'AAA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-1'
Class A Series A3 (ISIN ZAG000040643): 'AAA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-1'
Class B (ISIN ZAG000040650): 'AA(zaf)'; Outlook Stable; Loss Severity Rating 'LS-2'
Class C (ISIN ZAG000040668): 'A(zaf)'; Outlook Stable; Loss Severity Rating 'LS-2'
Class D (ISIN ZAG000040676): 'BBB(zaf)'; Outlook Negative; Loss Severity Rating 'LS-3'
Class E: 'BB(zaf)'; Outlook Negative; Loss Severity Rating 'LS-3'
Further commentary and performance data on the transaction are available on www.fitchratings.com.
Contact: Alfons Ideler , Johannesburg, Tel: +27 (0)11 380 0901; Aksel Etingu, London, +44 (0)20 7682 7135
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Additional information is available at www.fitchratings.com.
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