OREANDA-NEWS. Fitch Ratings has affirmed The Thekwini Fund 11 (RF) Limited's (Thekwini 11) notes National Long-term ratings as follows.

ZAR313.2m class A1 notes: 'AAA(zaf)'; Outlook Stable
ZAR500m class A2 notes: 'AAA(zaf)'; Outlook Stable
ZAR45m class A3 notes: 'AAA(zaf)'; Outlook Stable
ZAR292.8m class A4 notes: 'AAA(zaf)'; Outlook Stable
ZAR433m class A5 notes: 'AAA(zaf)'; Outlook Stable
ZAR253m class A6 notes: 'AAA(zaf)'; Outlook Stable
ZAR177.7m class A7 notes: 'AAA(zaf)'; Outlook Stable
ZAR832m class A8 notes: 'AAA(zaf)'; Outlook Stable
ZAR59m class B1 notes: 'A+(zaf)'; Outlook Stable
ZAR66m class B2 notes: 'A+(zaf)'; Outlook Stable
ZAR67m class B3 notes: 'A+(zaf)'; Outlook Stable
ZAR48m class C1 notes: 'BBB-(zaf)'; Outlook Stable
ZAR54m class C2 notes: 'BBB-(zaf)'; Outlook Stable
ZAR45m class C3 notes: 'BBB-(zaf)'; Outlook Stable
ZAR18m class D1 notes: Not rated
ZAR20m class D2 notes: Not rated
ZAR29m class D3 notes: Not rated
ZAR79.8m subordinated loan: Not rated

The transaction is a securitisation of residential mortgages originated by SA Home Loans Proprietary Limited (SAHL) in South Africa, which closed in August 2013. There were two subsequent tap issues in November 2013 and April 2014.

Credit enhancement is provided by over-collateralisation and a reserve fund of 2.5%. It totals 15% (from 13.9% at the second tap issue) for the class A notes, 9.1% (from 8.3%) for the class B notes and 4.5% (4.1%) for the class C notes.

KEY RATING DRIVERS
Good Asset Performance
The proportion of loans in arrears by more than 90 days is low at 1.2% of the outstanding portfolio balance. Provisioned loans with are more than 10 months delinquent are at 0.3% of the outstanding portfolio balance.

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 values (LTVs) and other loan features. SAHL's servicing and arrears management processes result in lower property sale discounts and shorter average work-out timelines than its peers. Fitch has consequently applied a 10% downward lender adjustment to the default probability at 'B(zaf)'.

Amortising Transaction
The revolving period ended in January 2015, although further advances can still be granted until the step-up date on the notes in July 2018. The sequential amortisation of the class A will continue until the ratio of the class B, C and D notes over total notes doubles from closing. The amortisation initially concerns class A1, A4 and A7 only, while the remaining class A tranches will begin amortising once those have been fully redeemed.

Low LTVs
The transaction features loans with a maximum loan to value (LTV) ratio of 81% and a portfolio covenant that limits any increase in the weighted average (WA) LTV from the initial portfolio to 1%. Given that the revolving period has ended, migration of assets could only ensue from further advances being granted, but Fitch expects this to be limited. The WA LTV for the combined portfolio was 63.3% as of end-July 2015.

Stable Asset Outlook
Fitch expects mortgage performance to remain broadly stable in the near term. The current inflationary recess also reduces the risk of sharp rises in interest rates. Despite strong 2014 figures, we still expect housing appreciation to be 7.5% in 2015 and 6.5% in 2016. Housing affordability should deteriorate slightly over coming years, as growth in household income will likely slow down.

RATING SENSITIVITIES

Expected impact on the note rating of increased defaults (class A/B/C):
Current ratings: 'AAA(zaf)'/'A+(zaf)'/'BBB-(zaf)'
Increase foreclosures by 15%: 'AA+(zaf)'/'A-(zaf)'/'BB+(zaf)'
Increase foreclosures by 30%: 'AA-(zaf)'/'BBB+(zaf)'/'BB(zaf)'

Expected impact on the note rating of reduced recoveries (class A/B/C)
Current ratings: 'AAA(zaf)'/'A+(zaf)'/'BBB-(zaf)'
Reduce recovery rate by 15%: 'AA+(zaf)'/'A(zaf)'/'BB(zaf)'
Reduce recovery rate by 30%: 'AA+(zaf)'/'BBB+(zaf)'/'B+(zaf)'

Expected impact on the note rating of increased defaults and reduced recoveries:
Current Ratings: 'AAA(zaf)'/'A+(zaf)'/'BBB-(zaf)'
Increase foreclosures by 15%; reduce recovery rate by 15%: 'AA(zaf)'/'BBB+(zaf)'/'BB-(zaf)'
Increase foreclosures by 30%; reduce recovery rate by 30%: 'A(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 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.

Prior to the transaction closing, 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.

Prior to the transaction closing, 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.

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.
-Loan-by-loan data provided by SAHL as at 17 August 2015.
-Transaction reporting provided by SAHL as at 20 July 2015.
-Additional information provided by SAHL via email.