OREANDA-NEWS. August 31, 2015. Fitch Ratings has assigned The Thekwini Fund 13 (RF) Limited's (Thekwini 13) notes final National Long-term ratings, as follows:

ZAR165m Class A1: 'AAA(zaf)'; Outlook Stable
ZAR90m Class A2: 'AAA(zaf)'; Outlook Stable
ZAR216m Class A3: 'AAA(zaf)'; Outlook Stable
ZAR56m Class A4: 'AAA(zaf)'; Outlook Stable
ZAR60m Class B: 'A+(zaf)'; Outlook Stable
ZAR40m Class C: 'BBB-(zaf)'; Outlook Stable
ZAR15m Class D: not rated

This transaction is a securitisation of residential mortgages originated by SA Home Loans (Pty) Ltd (SAHL) in South Africa.

KEY RATING DRIVERS

Strong Originator Performance
Fitch views the performance of mortgages originated by SAHL as slightly better than the average for the South African market at comparable loan-to-value (LTVs) and other loan features. SAHL's servicing and arrears management processes result in smaller property sale discounts and shorter average work-out timelines than peers. Fitch has consequently applied a 10% downward lender adjustment to the default probability at 'B(zaf)'

Extended Revolving Period
The transaction features a three-year revolving period, ending in August 2018, where principal collections in excess of scheduled amortisation of the class A1 notes may be used to purchase additional home loans. Such purchases are subject to the satisfaction of portfolio covenants, which Fitch considers sufficient to mitigate a material deterioration in performance.

Low LTVs Beneficial
The transaction features loans with a maximum LTV of 81% and a portfolio covenant that limits any increase in the weighted average (WA) cumulative LTV from the initial portfolio to 1% during the revolving period. This covenant restricts deterioration in the credit quality of the initial portfolio and limits the dilution of potential recoveries through replenishment.

Stable Asset Outlook
Fitch expects mortgage performance to remain broadly stable in the near term, as unemployment is likely to remain at its current elevated level. After the interest rise of July 2015 the SARB may continue to tighten monetary policy, but unless rates rise significantly Fitch does not expect this will materially affect mortgage affordability and performance. We still expect house price inflation to decelerate to 7.5% in 2015 and 6.5% in 2016.

RATING SENSITIVITIES

Rating sensitivity to increased foreclosure rate (class A/B/C)
Current ratings: 'AAA(zaf)'/'A+(zaf)'/'BBB-(zaf)'
Increase base case by 15%: 'AAA(zaf)'/'A+(zaf')/'BB+(zaf)'
Increase base case by 30%: 'AAA(zaf)'/'A+(zaf)'/'BB(zaf)'

Rating sensitivity to decreased recovery rate (class A/B/C)
Current ratings: 'AAA(zaf)'/'A+(zaf)'/'BBB-(zaf)'
Decrease base case by 15%: 'AAA(zaf)'/'A+(zaf)'/'(BB(zaf)'
Decrease base case by 30%: 'AA+(zaf)'/'A+(zaf)'/'BB-(zaf)'

Rating sensitivity to increased foreclosure rate and decreased recovery rate (class A/B/C)
Current ratings: 'AAA(zaf)'/'A+(zaf)'/'BBB-(zaf)'
Increase foreclosure rate by 15% and decrease recovery rate by 15%: 'AAA(zaf)'/'A+(zaf)'/'BB(zaf)'
Increase foreclosure rate by 30% and decrease recovery rate by 30%:
'AAA(zaf)'/'BBB+(zaf)'/'B(zaf)'

DUE DILIGENCE USAGE

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

DATA ADEQUACY

Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

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

Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

MODELS

The models below were used in the analysis. Click on the link for a description of the model.

Excel-based Residential Mortgage Asset Model
EMEA Cash Flow Model

SOURCES OF INFORMATION

Historical data, transaction documents and pool data provided by SAHL/SBSA and Fitch.