Global Credit Ratings (“GCR”) has accorded the following final, public long-term credit rating to the following Secured Class A Notes (“Class A Notes”) issued by MW Asset Rentals (RF) Ltd (the “Issuer”) (the “Transaction”) on 18 November 2016:
● Class A Notes, stock code MWAR01; R450,000,000; AAA(ZA)(sf) Stable Outlook.
GCR concurrently accorded the following final, public long-term credit rating to the following Notes issued by the Issuer on 29 March 2018 (“New Issuance”):
● Class A Notes, stock code MWAR02; R300,000,000; AAA(ZA)(sf) Stable Outlook.
The Issuer has increased the Subordinated Loan to R64,645,000 from R44,645,000 that is unrated and held by Merchant West (Pty) Ltd.
The final, public credit ratings accorded to the Class A Notes relate to timely payment of interest and ultimate payment of principal by their Final Redemption Date. The ratings exclude an assessment of the ability of the Issuer to pay either any (early repayment) penalties or any default interest rate penalties.
MW Asset Rentals (RF) Ltd is a R2.5bn Lease Receivables Backed Note Programme that issued R450m of Class A Notes on 18 November 2016 and issued a further R300m of new Class A Notes on 29 March 2018. The Asset Cover Ratio covenant of 1.25x covenant was adhered to, however revised upwards to 1.28x for the Class A Notes at March 2018. Although the covenant has historically been maintained at higher levels, GCR has only considered its minimum contractual level for the purpose of its rating analysis.
The Transaction has a Liquidity Reserve, Capital Reserve and Arrears Reserve – all being maintained at their required limits since November 2016. The Liquidity Reserve may be utilised to fund payments of Liquidity Shortfalls, only the Liquidity Reserve and Arrears Reserve have been taken into account for credit enhancement to the Class A Notes. GCR has been provided with a pool cut per 28 February 2018 that reported R914.4m of assets and the expected portfolio at 31 March 2018 of R989.6m.
All receipts in respect of the Participating Assets and existing Assets held by the Seller are comingled in the Collections account which is administered by the Servicer on behalf of the Collections SPV, a bankruptcy report entity. Any disbursements from the Collections SPV are made towards the Issuer’s Transaction Account, held at Nedbank Ltd, within two business days, therefore minimising comingling risk.
The Originator, Seller and Servicer are Merchant West (Pty) Ltd, an asset-backed financier that offers tailored finance structured for finance leases, operating lease rentals, full maintenance leasing of office automation, ITC equipment, yellow metal equipment, vehicles, trucks and aviation to the public and corporate sector. Merchant West reported market comparable defaults albeit non-granular, however high to full recovery are usually realised within the first 24 months. The February 2018 portfolio assets consist of a variety of assets with concentrations towards Office Equipment and IT Equipment (37.5%), Commercial and Agriculture (15.9%) and Mining/Construction (13.9%). Non-Government client leases are deemed non-performing if it’s in arrears for more than 90 days, whist Government client leases are deemed non-performing if it’s in arrears for more than 150 days. The Issuer reported bad debts of R8.4m (1.36% of total assets) at January 2018 per the Servicer Report.