OREANDA-NEWS. Fitch Ratings has assigned Torque Securitisation (RF) Limited's class A5, B2 and C2 notes expected ratings as follows:

ZAR238m Class A5 notes 'AAA'(zaf)(EXP); Outlook Stable
ZAR84m Class B2 notes 'A+'(zaf)(EXP); Outlook Stable
ZAR49m Class C2 notes 'BBB'(zaf)(EXP); Outlook Stable

The proceeds from the notes issue will redeem the class A2, B and C notes on their scheduled maturity date of 15 August 2015. The issue's overall balance will remain unchanged after the refinance.

The assignment of the final ratings is contingent on the receipt of the final legal opinion conforming to information already received.

The notes are backed by a revolving pool of South African auto loan receivables originated by Iemas Financial Services (Co-operative) Limited (Iemas). Iemas is the largest financial services trade co-operative in South Africa and has been originating auto loans since 1993.

KEY RATING DRIVERS

Weakening Asset Performance
Defaults have increased throughout 2013 and 2014, driven by redundancies and retrenchment in a number of employer groups, along with a general downturn in the South African economy. Recoveries have also declined, driven by ineffective and insufficient resources available in Iemas's repossession department, along with an increase in the time needed to repossess vehicles.

The servicer has recruited additional resources and improved the processes to address the shortcomings in the recovery process and Fitch expects future recoveries to be closer to their historical values. Fitch has revised the base case default assumption to 4.5% from 3.8%, with a multiple slightly below the criteria's median (4.54x for 'AAA(zaf)'), and applied a recovery rate base case of 50% with median stresses (50% for 'AAA(zaf)').

Employer Concentration Risk
The transaction's employer concentration risk, due to Iemas targeting large employers across South Africa and originating loans to their respective employees, is mitigated by concentration limits built into the transaction. Fitch has carried out scenario analysis on the effect of an insolvency of the top employers and views that available credit enhancement is sufficient to cover potential additional defaults stemming from this risk.

Evergreen Transaction, Subsequent Issuance
The transaction featured an initial two-year revolving period, which can be extended continuously by two years. Moreover, the transaction allows for additional issuance of notes of varying maturity and seniority. The purchase of additional assets during the revolving period is subject to various eligibility covenants and further issuance are subject to Fitch confirmation.

Counterparty Risk
Outsourced Securitisation Services (Pty) Ltd (a subsidiary of Deloitte South Africa) acts as back-up servicer and receives monthly portfolio information. In addition, the transaction benefits from a ZAR31m liquidity facility provided by FirstRand Bank Limited (FirstRand; AA(zaf)/Stable/F1+(zaf)) that is sufficient to cover around three months of senior fees and interest. Both measures should support a smooth transition of servicing if needed.

Stable Asset Outlook
Fitch maintains a stable asset outlook for South African consumer ABS transactions. While a continued slowdown in the South African economy is expected over the next 12 months, along with increased defaults due to continuing retrenchment activity within various employer groups, the agency believes that defaults are likely to remain within base-case expectations, as they already incorporate Fitch's short-term macroeconomic expectations.

RATING SENSITIVITIES
Unexpected increases in the default rate and loss severity on defaulted loans could produce loss levels larger than Fitch's assumptions and could result in negative rating actions on the notes.

Rating sensitivity of the class A notes to increased default rate assumptions:
Current ratings: 'AAA(zaf)(EXP)'/'A+(zaf)(EXP)'/'BBB(zaf)(EXP)'
Increase in default rate by 10%: 'AA+(zaf)(EXP)'/'A(zaf)(EXP)'/'BBB-(zaf)(EXP)'
Increase in default rate by 25%: 'AA(zaf)(EXP)'/'A-(zaf)(EXP)'/'BB+(zaf)(EXP)'
Increase in default rate by 50%: 'A+(zaf)(EXP)'/'BBB(zaf)(EXP)'/'BB(zaf)(EXP)'

Rating sensitivity of the class A notes to reduced recovery rate assumptions:
Current ratings: 'AAA(zaf)(EXP)'/'A+(zaf)(EXP)'/'BBB(zaf)(EXP)'
Decrease in recovery rate by 10%: 'AA+(zaf)(EXP)'/'A(zaf)(EXP)'/'BBB-(zaf)(EXP)'
Decrease in recovery rate by 25%: 'AA+(zaf)(EXP)'/'A(zaf)(EXP)'/'BBB-(zaf)(EXP)'
Decrease in recovery rate by 50%: 'AA+(zaf)(EXP)'/'A-(zaf)(EXP)'/'BB+(zaf)(EXP)'

Rating sensitivity of the class A notes to multiple factors:
Current ratings: 'AAA(zaf)(EXP)'/'A+(zaf)(EXP)'/'BBB(zaf)(EXP)'
Increase in default rate and decrease in recovery rate by 10% each: 'AA+(zaf)(EXP)'/'A-(zaf)(EXP)'/'BB+(zaf)(EXP)'
Increase in default rate and decrease in recovery rate by 25% each: 'AA-(zaf)(EXP)'/'BBB+(zaf)(EXP)'/'BB-(zaf)(EXP)'
Increase in default rate and decrease in recovery rate by 50% each: 'A(zaf)(EXP)'/'BBB-(zaf)(EXP)'/'B+(zaf)(EXP)'

Upon completion of the refinancing the capital structure will be as follows:

ZAR200m Class A3: 'AAA(zaf)'; Outlook Stable
ZAR250m Class A4: 'AAA(zaf)'; Outlook Stable
ZAR238m Class A5: 'AAA(zaf)'; Outlook Stable
ZAR84m Class B2: 'A+(zaf)'; Outlook Stable
ZAR49m Class C2: 'BBB(zaf)'; Outlook Stable
ZAR70m Class D: Not rated

Key Rating Drivers and Rating Sensitivities are further described in the presale report, which is available at www.fitchratings.com

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch sought to receive a third party assessment conducted on the asset portfolio information, but none was available for this transaction.

Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

SOURCES OF INFORMATION
The information below was used in the analysis.
-Static default and recovery data provided by Iemas spanning September 2005-April 2015
-Dynamic prepayment and delinquency data provided by Iemas spanning September 2005- April 2015
-Stratification tables provided by Iemas as of end-April 2015