OREANDA-NEWS. January 19, 2016. Fitch Ratings has affirmed Synthesis Funding Limited's (Synthesis) asset-backed commercial paper (ABCP) at National Short-term rating 'F1+(zaf)', following a review of the programme.

KEY RATING DRIVERS
The affirmation reflects the stable credit quality of Synthesis' underlying portfolio, the satisfactory review of the programme, and the rating of Nedbank (AA(zaf)/Stable/F1+(zaf)), the conduit's sponsor and liquidity provider.

Assets funded by the conduit benefit from 100% programme-wide liquidity support provided by Nedbank. Liquidity cannot be drawn against defaulted assets.

Synthesis is a partially-supported conduit whose credit support is dependent on transaction-specific credit enhancement as well as available programme-wide credit enhancement (PWCE) provided by Nedbank. PWCE is calculated as 5% of the aggregate book value of financial assets (excluding defaults) plus a dynamic percentage based on the credit quality of the underlying portfolio of the rated securities. If a rated security falls below 'AA-(zaf)', Synthesis must either remove the asset from the portfolio, obtain a guarantee by an entity rated at least 'AA-(zaf)' or Nedbank must post PWCE within 15 business days.

Currently, there are no financial assets in the conduit portfolio and all rated securities are rated at least 'AA-(zaf)' or are guaranteed by Nedbank if rated below 'AA-(zaf)'. As a result, no PWCE is currently required in accordance with Synthesis' transaction documentation.

Nedbank fulfils the roles of sponsor, administrator, liquidity provider, credit enhancement provider, hedge provider and account bank. The rating of Synthesis' CP is highly dependent on Nedbank particularly in its role as liquidity and credit enhancement provider.

As part of the review, Fitch received a presentation from Nedbank containing information about the conduit's performance, CP issuance, portfolio composition, staff experience, systems and credit policy over the past 12 months. Fitch believes Nedbank has the expertise and systems in place to effectively manage the conduit.

TRANSACTION CHARACTERISTICS
Synthesis contained 24 assets as of 31 December 2015, funding primarily corporate loans, followed by RMBS. There are no financial assets in the portfolio. Compared with the portfolio 12 months ago, CP issuance volume and portfolio size have declined. Synthesis's total redemption in 2015 totalled ZAR921m while acquisitions only reached ZAR385m for the same period. At end-2015, it had ZAR2.7bn of CP outstanding.

Synthesis is a partially-supported, South African hybrid ABCP programme structured to issue CP up to a maximum programme limit of ZAR15bn. CP is issued at a discount to its face value and with a maximum maturity of 364 days to finance the purchase of rand-denominated financial assets and rated securities.

More details are in the Synthesis full rating report which is available at www.fitchratings.com.

RATING SENSITIVITIES
The rating of Synthesis' CP is highly dependent on Nedbank's creditworthiness. A downgrade of Nedbank as liquidity or credit enhancement provider could lead to a downgrade of the CP.

Additionally, the CP rating is dependent on the available PWCE provided by Nedbank for financial assets and rated securities. If the credit quality of the underlying portfolio deteriorates without remedial action specified by the transaction documents, the CP rating may also be downgraded.

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.

All of the underlying assets have ratings from either Fitch or other 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.

SOURCE OF INFORMATION
The information below was used in the analysis:
Rating agency reports provided by Nedbank as at 31 December 2015
Annual review presentation provided by Nedbank as at 4 January 2016