Fitch Affirms iMpumelelo 1 at 'F1 (zaf)' Following Restructuring
iMpumelelo 1 is a fully-supported asset-backed CP programme sponsored by Absa Bank Limited (Absa, AAA(zaf)/Stable/F1+(zaf)). Absa fulfils multiple roles in the programme, including sponsor and guarantor. As a result, the CP rating is credit-linked to Absa's Short-term Issuer Default Rating (IDR), although CP investors would still have recourse to the assets in case of Absa's default.
iMpumelelo 1 is a hybrid vehicle that can purchase both financial assets and securities. The master programme allows for multiple series, although Fitch currently only rates Series 1.
KEY RATING DRIVERS
Notes Guaranteed by Sponsor
The programme's sponsor, Absa, supports the rating of the CP by guaranteeing repayment to the CP holders. In addition, Absa guarantees to the issuer that it will cover any credit losses or liquidity shortfalls arising on the assets.
Fully-Supported Programme
The rating of the CP issued by iMpumelelo 1 chiefly relies on the guarantee. Fitch has reviewed a South African law legal opinion according to which the irrevocable and unconditional guarantee constitutes a legal, valid and binding obligation of Absa. As the guarantee covers all credit risk, no programme-wide credit enhancement is provided for in this conduit. Also, as the guarantee covers liquidity shortfalls, the ZAR10bn programme is fully supported.
High Credit Quality Sponsor
Absa is one of the highest Fitch-rated entities in South Africa. The CP rating is dependent on Absa as guarantor and sponsor of the programme. As such, Fitch has credit-linked the rating to Absa's rating, regardless of the credit quality of the assets.
PROGRAMME RESTRUCTURING
On 29 July 2015, the CP programme was restructured and re-labelled 'serialised note programme Absa guaranteed notes series', thus moving from a multi-issuer structure to a multi-series structure.
iMpumelelo 1 remains a fully-supported programme regardless of the restructuring, but the way this full support is provided has significantly changed. Where now Absa provides the guarantee, it used to be liquidity facility provider (thus providing liquidity support) and asset support undertaker (thus providing credit support).
A feature introduced through the restructuring is the ability to issue medium-term notes (MTN) with a maturity between 13 months and 10 years, in addition to the CP whose maximum tenor is 13 months. The guarantee covers MTN as well as CP. No MTN can be issued unless Fitch has assigned a rating.
RATING SENSITIVITIES
Any rating action on Absa's Short-term IDR, will be reflected by the rating of iMpumelelo 1's CP. In turn, Absa's rating is driven by the intragroup support received by its ultimate parent company, Barclays plc (A/Stable/F1).
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
--Transaction reporting provided by Absa as at 15 May 2015
--Additional information provided by Absa
--New transaction documentation following the restructuring
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