Fitch: Monitoring Proposed Restructuring of Thekwini Conduit
Fitch Ratings-London/Johannesburg-09 November 2009: Fitch Ratings says today that it has been informed by The Standard Bank of South Africa (SBSA, rated 'AA(zaf)'/'F1+(zaf)'/Stable Outlook), the arranger of the Thekwini Warehousing Conduit (Proprietary) Limited (Thekwini Conduit), that it intends to restructure Thekwini Conduit, which issues commercial paper (CP) notes rated 'F1+(zaf)', 'F1(zaf)' and 'F2(zaf)'. Fitch Ratings is currently remodelling and revaluating the proposed structure in terms of its current RMBS (residential mortgage backed securities) and ABCP (asset-backed commercial paper) criteria.
As of end-September 2009, Thekwini Conduit had at total of ZAR3.16bn CP notes outstanding, split between ZAR3.06bn CP notes rated 'F1+(zaf)', ZAR50.7m notes rated 'F1(zaf)' and ZAR52.6m notes rated 'F2(zaf)'. The conduit also benefited from a subordinated loan sized at just over ZAR82m.
Thekwini Conduit is a single-seller ABCP conduit backed by mortgage loans originated in South Africa by SA Home Loans (SAHL). The conduit issues various tranches of CP to fund the purchase of mortgage loans, and the programme also benefits from a subordinate loan provided by SAHL.
CP investors are exposed to the risk that mortgage loans default during the term of the CP and that such defaults exhaust the level of credit enhancement then available in the conduit. The conduit defines a defaulted mortgage loan as one that is more than three months in arrears. Mortgage delinquencies have risen over the past two years in South Africa in response to high interest rates and the economic recession. Nevertheless, the arrears in Thekwini Conduit have remained at fairly low levels. Amongst other things, this is due to the fact that SAHL has tended to buy defaulted mortgage loans out of the pool. However, SAHL has no obligation to do this under the terms of the transaction documents.
For further details on Fitch's RMBS and ABCP criteria, please see the criteria reports, entitled 'Global Rating Criteria for Asset-Backed Commercial Paper', published on 22 October, 2009, and 'Criteria for Rating Residential Mortgage Securitisations in Emerging Markets - EMEA', published on 30 September, 2008, both of which are available on the agency's website, www.fitchratings.com.
Contacts: Peter Winning, London, +44 (0) 20 7682 7492; Emma-Jane Fulcher, +44 (0) 20 7417 3529; Alfons Ideler, Johannesburg, +27 11 380 0901.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
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