July 26 - Link to Fitch Ratings' Report: Torque Securitisation (RF) LimitedJuly 26 - Fitch Ratings has assigned Torque Securitisation (RF) Limited's notes the following expected ratings: ZAR 250.0m Class A1: 'AAA(EXP)zaf'; Outlook Stable ZAR 238.0m Class A2: 'AAA(EXP)zaf'; Outlook Stable ZAR 200.0m Class A3: 'AAA(EXP)zaf'; Outlook Stable ZAR 84.0m Class B: 'A+(EXP)zaf'; Outlook Stable ZAR 49.0m Class C: 'BBB(EXP)zaf'; Outlook Stable ZAR 70.0m Class D: Not rated The notes are backed by a revolving pool of South African auto loan receivables originated by Iemas Financial Services (Co-operative) Limited (Iemas, not rated). Iemas is the largest financial services trade co-operative in South Africa and has been originating auto loans since 1993. Fitch analysed the preliminary portfolio, which as of 30 June 2012, comprised 8,182 loans with an average current balance of ZAR110,017. No loans are originated with a term greater than 72 months. The WA remaining term was 48 months and 31% of the pool related to new vehicles with 69% representing used vehicles. The historical default rate performance for the pool has been in line with European auto transactions, despite South Africa's high unemployment rate and low GDP. This performance is driven by the fact that the majority of loans are repaid via salary deduction. Fitch has set a base case default assumption of 4% and then applied median stresses (eg 5x for 'AAA(zaf)' to the base case. Further, Fitch applied a recovery rate base case of 50% and used the median stresses (50% for 'AAA(zaf)') as specified in its criteria. For most of the loans, the monthly instalments are paid via salary deduction, ie payments are deducted by the employers from the gross salary of the borrowers and are then directly paid to Iemas. While this is generally a very strong feature, the transaction is also exposed to some employer concentrations. Although this risk is limited by concentration limits built into the transaction, Fitch took the concentrations into account by increasing its default assumptions for high rating scenarios. CE will be provided via overcollateralisation provided by subordination of the junior notes and a cash reserve account funded at closing. For example, the Class A notes benefit from 23.8% credit enhancement, which is provided by 22.8% overcollateralisation and the 1.0% cash reserve. Iemas will act as servicer to the transaction. The transaction benefits from a back-up servicer (BUS), a subsidiary of Deloitte (unrated), which is contracted to board the portfolio and commence servicing within 7 days of invocation of the BUS agreement. Fitch considers the implementation of a BUS positive for the transaction to reduce payment interruption and liquidity risks. The transaction also benefits from a liquidity facility which can cover around three months of senior expenses and interest on the rated notes. A presale report is available at www.fitchratings.com. Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria, "EMEA Consumer ABS Rating Criteria" and EMEA Consumer ABS Rating Criteria - Auto Residual Value Addendum, dated 12 July 2012, are available at www.fitchratings.com. Applicable Criteria and Related Research: EMEA Consumer ABS Rating Criteria EMEA Consumer ABS Rating Criteria - Auto Residual Value Addendum
© Thomson Reuters 2012 All rights reserved
