OREANDA-NEWS. Fitch Ratings has affirmed Thekwini Warehousing Conduit's (Thekwini Conduit) commercial paper (ABCP) following a review of the programme as follows:

ZAR2.959bn Senior CP: affirmed at 'F1+(zaf)'
ZAR18m Mezzanine CP: affirmed at 'F1(zaf)'
ZAR11m Junior CP: affirmed at 'F2(zaf)'

Thekwini Conduit is a single-seller ABCP conduit backed by mortgage loans originated by SA Home Loans Limited (SAHL).

KEY RATING DRIVERS
Dynamic Credit Enhancement
The dynamic nature of the credit enhancement (CE) means that Fitch is confident that any potential risk stemming from the deteriorating credit quality of the assets has been addressed. If default roll rates increase, the available CE for the transaction should also increase, or further CP issuance would be halted.

Availability of Liquidity Support
Fitch gained comfort with respect to the timely payment of interest and principal due to the presence of a liquidity facility within the transaction provided by the Standard Bank of South Africa Limited, (SBSA; AA(zaf)/Stable/F1+(zaf); affirmed on 11 December 2015). To date, the facility has never been drawn and is available to provide support if needed.

Strong Originator Performance
Fitch views the performance of mortgages originated by SAHL as slightly better than the average for the South African market in terms of LTV. SAHL's servicing and arrears management processes result in lower property sale discounts and shorter average work-out timelines than peers.

Asset Outlook Stable/Negative
Fitch expects that the long-term trend of improving mortgage performance since the crisis might reach a turning point in 2016, due to a further tightening in monetary policy by the South African Reserve Bank in an effort to curb persistent rising inflation, despite the continued weak economic growth. Job losses in key sectors such as mining might also hamper performance.

TRANSACTION CHARACTERISTICS
The conduit issues various tranches of CP with a maximum tenor of six months to fund the purchase of mortgage loans. The dynamic CE available for the transaction is sized based on default roll rates. The availability of a non-performing loan (NPL) facility, where SBSA is obligated to buy defaulted loans at 60% of their value upon a NPL trigger being hit is also incorporated into the calculation.

The conduit also benefits from several revolving liquidity facilities provided by SBSA to cover temporary cash shortfalls and enable timely repayment of securities between the amortisation profile of the notes and assets. These liquidity facilities provide 100% liquidity support to the respective CP notes and cannot be drawn to cover defaulted assets.

Fitch relied on mortgage data for all mortgages originated by SAHL from 1999 to May 2013 (at the time of the development of the current version of South Africa RMBS criteria) to determine Thekwini's Conduit's default roll rates, which were supported by performance data on SAHL's book and data on other term transactions by the same originator up to December 2015. Based on this analysis, as well as additional investigations on the actual default experience in the transaction and the evolution of asset quality for major South African banks, Fitch is comfortable that the ratings reflect the credit quality of each class of CP notes.

As of December 2015, Thekwini Conduit had a total ZAR2.99bn CP notes outstanding. The conduit also benefited from overcollateralisation of ZAR76.75m funded by a subordinated loan.

More details are in Thekwini Conduit's full rating report, which is available at www.fitchratings.com.

RATING SENSITIVITIES
Thekwini Conduit has limited sensitivity to increased defaults as the dynamic nature of the CE available for the transaction is structured to capture any deteriorating asset performance, and available CE should be increased automatically to avoid any negative rating action. If the CE is not increased, further CP issuance would be halted.

Additionally, if SBSA's Short-term rating is downgraded, this may result in the downgrade of Thekwini Warehousing Conduit's CP as SBSA acts as liquidity provider, NPL facility provider, hedge counterparty, sponsor and administrator to the conduit.

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.