Fitch Rates Sanlam Home Loans 103 (Pty) Limited Notes
Fitch Ratings-Johannesburg/London-23 October 2009: Fitch Ratings has assigned Sanlam Home Loans 103 (Pty) Limited's (Sanlam Home Loans 103) floating-rate notes final National ratings and Loss Severity Ratings as follows:
ZAR620m Class A2U notes: 'AAA(zaf)', 'LS-1', Outlook Stable
ZAR70m Class B2U notes: `AA(zaf)', 'LS-2', Outlook Stable
ZAR10m Class C2U notes: 'A(zaf)', 'LS-3', Outlook Stable
ZAR180m Class D2U notes: `BBB(zaf)', `LS-2', Outlook Stable
Fitch has simultaneously affirmed the National ratings of Sanlam Home Loans 103's outstanding notes and assigned Loss Severity Ratings as follows:
ZAR400m Class A2 notes: `AAA(zaf)', `LS-1', Outlook Stable
ZAR100m Class A3 notes: `AAA(zaf)', `LS-1', Outlook Stable
ZAR355m Class A5 notes: `AAA(zaf)', `LS-1', Outlook Stable
ZAR176m Class A6 notes: `AAA(zaf)', `LS-1', Outlook Stable
ZAR295m Class A8 notes, `AAA(zaf)', `LS-1', Outlook Stable
ZAR319m Class A9 notes, `AAA(zaf)', `LS-1', Outlook Stable
ZAR356m Class A10 notes, `AAA(zaf)', `LS-1', Outlook Stable
ZAR535m Class A11 notes: `AAA(zaf)', `LS-1', Outlook Stable
ZAR45m Class A12 notes: `AAA(zaf)', `LS-1', Outlook Stable
ZAR29m Class B2 notes: `AA(zaf)', 'LS-2', Outlook Stable
ZAR36m Class B4 notes: `AA(zaf)', 'LS-2', Outlook Stable
ZAR12m Class B5 notes: `AA(zaf)', `LS-2', Outlook Stable
ZAR75m Class B7 notes: `AA(zaf)', `LS-2', Outlook Stable
ZAR48m Class B8 notes: `AA(zaf)', `LS-2', Outlook Stable
ZAR54m Class C2 notes: `A(zaf)', `LS-3', Outlook Stable
ZAR35m Class C3 notes: `A(zaf)', `LS-3', Outlook Stable
ZAR23m Class D2 notes: `BBB(zaf)', `LS-2', Outlook Stable
ZAR17m Class D3 notes: `BBB(zaf)', `LS-2', Outlook Stable
Sanlam Home Loans 103 is a South African special purpose vehicle that issues notes to finance the acquisition of residential mortgages originated by Sanlam Home Loans (Pty) Ltd (SHL). SHL originates home loans on behalf of Sanlam Home Loans 101 (Pty) Limited, the seller. Sanlam Home Loans 103 has issued new notes to refinance notes that reached their scheduled maturity on 22 October 2009. The notes which have been redeemed are Class A - Series A13, A15, A1U; Class B - Series B9; Class C - Series C4, and C1U and Class D - Series D1U. In lieu of these redeemed notes new notes i.e. A2U, B2U, C2U and D2U have been issued with scheduled maturity date on 22 April 2010.
The rating is based on the quality of the collateral available credit enhancement and the underwriting capacity of SHL. Fitch has applied its existing default model criteria for South African residential mortgages ("South African Residential Mortgage Default Model 2003", dated 5 August 2003) for the analysis of default probability and loss severity of the collateral. In the context of the current review, Fitch has increased the probability of default of the SHL pool to take into account a recent deterioration in collateral performance. Fitch has also increased its market value decline assumptions for the pool on the evidence of large reported price discounts for properties sold during the current economic downturn. As a result of these two adjustments, the overall expected losses from the pool are now higher than those expected for the pool assessed in October 2008.
The ratings also reflect the available credit enhancement, including excess spread, the servicing capabilities of SHL, the hedging agreements in place, the liquidity facility and the legal and financial structure of the transaction.
All the rated notes are supported by credit enhancement from an unrated subordinated loan sized at 5.25% of the aggregate note balance. The senior notes are also supported by enhancement provided by the rated subordinate notes. Thus the credit enhancement for the Class A notes totals 19.975% and is provided by the subordination of the Class B (6.75% in size), Class C (2.475% in size), Class D (5.5% in size) and the subordinated loan of 5.25%. The notes also benefit from a liquidity facility which is 5% of the notes outstanding at any point in time.
The transaction contemplates the periodic refinancing of tranches of notes with different scheduled maturities. With the current structure, failure to refinance a series of notes coming due may result in a change in overall credit enhancement which might be detrimental to senior investors. Fitch has determined that the potential impact on the transaction of such refinancing failure is minimal in the short term. However, if this structural weakness is not addressed prior to future scheduled refinancing maturity dates, it may have an impact on the transaction ratings.
Fitch also evaluated the degree of loss severity in the event that each class of notes defaults, indicated by its Loss Severity rating.
The new issue report will be available shortly on www.fitchratings.com.
Contacts: Alfons Ideler, Johannesburg, Tel: +27 (0) 11 3800 901; Kali K Sirugudi +44 (0) 20 7682 7257.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@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.
Additional information is available on www.fitchratings.com.
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