OREANDA-NEWS. Fitch Ratings has upgraded Fox Street 1 (RF) Limited's notes National Long-term ratings as follows:

ZAR139m class A4 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR690m class A5 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR130m class B notes: upgraded to 'A(zaf)' from 'A-(zaf) '; Outlook Stable
ZAR65m class C notes: upgraded to 'BBB(zaf)' from 'BBB-(zaf)'; Outlook Stable
ZAR35m class D notes: affirmed at 'BB(zaf)'; Outlook Stable
ZAR116m subordinated loan: not rated

The transaction is a securitisation of mortgage loans granted by Investec Bank Limited to its private banking clients in South Africa.

KEY RATING DRIVERS
Robust Asset Performance and Underwriting
The historical performance of Investec Bank Limited's (Investec, AA-(zaf)/Stable/F1+(zaf)) mortgage loan book is stronger than the market average for South Africa. In Fitch's opinion, this is due to the credit profile of Investec's private banking clients as well as its underwriting practices. The agency has considered this by applying a 10% downward lender adjustment to the default probability at 'B(zaf)'.

Using portfolio data as of end-August 2015, Fitch calculated the weighted average foreclosure frequency and weighted average recovery rate at 22.7% and 52%, respectively, at 'AAA(zaf)', compared with 23.1% and 48.3% at closing in May 2014.

Bespoke Customer Profile
All borrowers are private banking clients of Investec who typically earn in excess of ZAR800,000 per year or are professionals with high expected incomes. Compared with standard prime borrowers, these customers tend to have higher leverage but are expected to have a lower risk profile and a higher propensity to prepay when market conditions are more benign or competition is fiercer.

Large Properties and Loan Exposures
The portfolio consists of larger-than-average loans secured by higher value properties. Fitch has made relevant adjustments as per its criteria to address the risk of steeper sale discounts.

Interest-Constrained Structure
The transaction has a strict separation of the interest and principal priority of payments (PoP), which could result in shortages in the interest PoP should performance deteriorate. This is, however, mitigated by a liquidity reserve although once this is depleted it is unlikely to be replenished with interest proceeds alone given minimal excess spread.

Potential Notes Call at Loss
The originator has the option to repurchase notes from 60 months after closing at their outstanding principal (plus accrued interest) minus any amount written on the principal deficiency ledger's (PDL) balance as of the call date. Losses that could otherwise cure may crystallise as a result of such a call option being exercised.

Based on the stressed cash flows analysis, however, Fitch sees the additional note losses potentially resulting from this feature as limited. In addition, no such losses are expected on the class A notes, even under a 'AAA(zaf)' scenario, as Fitch does not expect class A to have a positive PDL.

RATING SENSITIVITIES
Rating sensitivity to increases in weighted average foreclosure frequency (WAFF) (class A/class B/class C/class D)
Current ratings: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'
Increase base case by 15%: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'
Increase base case by 30%: 'AA+(zaf)'/'A(zaf)'/'BBB-(zaf)'/'BB(zaf)'

Rating sensitivity to decreases in weighted average recovery rates (WARR) (class A/class B/class C/class D)
Current ratings: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'
Decrease base case by 15%: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'
Decrease base case by 30%: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'

Rating sensitivity to shifts in multiple factors (class A/class B/class C/class D)
Current ratings: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'
WAFF increases by 15%, WARR decreases by 15%: 'AAA(zaf)'/'A(zaf)'/'BBB(zaf)'/'BB(zaf)'
WAFF increases by 30% and WARR decreases by 30%: 'AAA(zaf)'/'A(zaf)'/'BBB-(zaf)'/'BB(zaf)'

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

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools 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 did not review the results of a third party assessment conducted on the asset portfolio information.

Prior to the transactions 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.

Sources of Information:
Investor reports & loan by loan pool tape provided by Investec.

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