OREANDA-NEWS. Fitch Ratings has affirmed Synthesis Funding Ltd's (Synthesis) asset-backed commercial paper (CP) at National Short-term rating 'F1+(zaf)', following a review of the programme.

KEY RATING DRIVERS
The affirmation reflects the stable credit quality of Synthesis' underlying portfolio, the satisfactory review of the programme, and the rating of Nedbank Limited (Nedbank, AA(zaf)/Stable/F1+(zaf)), the conduit's sponsor and liquidity provider.

Synthesis is a partially-supported conduit whose credit support is dependent on the available programme-wide credit enhancement (PWCE) provided by Nedbank. PWCE is calculated as 5% of the aggregate book value of financial assets (excluding defaults) plus a dynamic percentage based on the credit quality of the rated participating assets (ie rated securities). Furthermore, if a rated security falls below 'AA-(zaf)', Synthesis must either remove the asset from the portfolio, obtain a guarantee by an entity rated at least 'AA-(zaf)' or Nedbank must post PWCE within 15 business days.

Currently, there are no financial assets in the conduit portfolio and all rated securities are rated at least 'AA-(zaf)' or are guaranteed by Nedbank if rated below 'AA-(zaf)'. As a result, no PWCE is currently required in accordance with Synthesis' transaction documentation.

Nedbank fulfils the roles of sponsor, administrator, liquidity provider, credit enhancement provider, hedge provider and account bank. The rating of Synthesis' CP is highly dependent on Nedbank particularly in its role as liquidity and credit enhancement provider.

As part of the review, Fitch conducted an operational review and discussed the conduit's performance, CP issuance, portfolio composition, staff experience, systems and credit policy over the past 12 months with Nedbank's conduit management team. Fitch believes Nedbank has the expertise and systems in place to effectively manage the conduit.

RATING SENSITIVITIES
The rating of Synthesis' CP is highly dependent on Nedbank's creditworthiness. A downgrade of Nedbank as liquidity or credit enhancement provider could lead to the downgrade of the CP.

Additionally, the CP rating is dependent on available PWCE provided Nedbank for financial assets and rated securities. If the credit quality of the underlying portfolio deteriorates without remedial action specified by the transaction documents, the CP rating may also be downgraded.

TRANSACTION CHARACTERISTICS
Synthesis is a partially-supported, South African ABCP programme structured to issue CP up to a maximum programme limit of ZAR15bn. CP is issued at a discount to its face value and with a maximum maturity of 364 days to finance the purchase of rand denominated financial assets and rated securities. All of the conduit's underlying assets are supported with liquidity provided mainly by Nedbank. At end-2014, the conduit funded primarily corporate loans, followed by RMBS; it had ZAR3.3bn of CP outstanding.