Mortgage Warehouse Funding Limited’s Asset Backed Commercial Paper – Indicative Ratings

29 Jun 2017 In Rating Notifications

Mortgage Warehouse Funding Limited’s Asset Backed Commercial Paper – Indicative Ratings

Lagos, 29 June 2017—Global Credit Ratings has accorded indicative public short term ratings of A1(NG)(sf) and A1-(NG)(sf)  respectively to the Senior and Subordinated Commercial Paper Notes (“CP” or “Notes”) to be issued by Mortgage Warehouse Funding Limited (“MWFL” or “Issuer”) from time to time under MWFL’s N20bn multi-seller Asset Backed Commercial Paper (“ABCP”) Programme. The outlooks were accorded as Positive. The indicative ratings relate to timely payment of interest and principal, and will expire in September 2017. Final ratings will be accorded upon receipt of final signed and executed transaction documents.

RATING RATIONALE

Mortgage Warehouse Funding Limited (“MWFL”) is a special purpose company set up to provide short term funding to its owner-mortgage banks in Nigeria, through the establishment of a multi-seller asset-backed commercial paper programme (the Programme” or “CP Programme”). The CP Programme provides short term liquidity by prefinancing Eligible Mortgage Loans (“EMLs”) originated by MWFL’s Member Mortgage Banks (“MMBs” or “the Banks”) and qualifying mortgage lending institutions, pursuant to the terms of a Master Purchase, Pre-finance and Servicing Agreement (“MPPSA”). MFWL’s purchase of related mortgage loan rights shall be with recourse to the respective Banks. EMLs must comply with the uniform underwriting standards (“UUS”) issued by Nigerian Mortgage Refinancing Company (“NMRC”). The Issuer’s ABCP Programme will be managed by Citihomes Finance Company Limited.

MWFL will enter into a Liquidity Asset Purchase Agreement (“LAPA”) with NMRC to provide liquidity to the CP issuance Programme. By the LAPA, NMRC has unconditionally and irrevocably committed to refinance mortgage loans that meet its eligibility criteria, after a six-month seasoning period. Pursuant to the LAPA, NMRC has a right to defer purchases on account of the occurrence of certain Force Majeure events but will endeavour to continue to perform its obligations so far as is reasonably practicable.

NMRC’s ability to refinance the mortgages is enhanced by its N140bn Medium Term Note (“MTN”) Programme, which is backed by the unconditional and irrevocable Guarantee of the Federal Government through a Deed of Guarantee, dated 30 April 2015. NMRC issued AAA rated (N8bn) Series 1 Bonds, under its MTN Programme in July 2015, as the rating of the Bonds is credit linked to the rating of the FGN in its capacity as Guarantor.

Prior to MWFL’s refinancing, each MMB is required to deposit 10% of the face value of CPs to be issued in the applicable Series into the Reserve Account, with the Collecting and Paying Agent, to provide the required 10% Program-Wide Credit Enhancement (“PWCE”). The internally created credit enhancement of the senior/subordinate capital structure and the PWCE provide cash flow cover of 48% (6.28x cover) to the Senior Notes and 28% (3.67x cover) to the Subordinated Notes. If the underlying property value is included, total collateralisation increases to 58% (7.64x cover) for Senior Notes and 42% (5.54x cover) for Subordinated Notes.

The Issuer’s obligations to the Noteholders are secured by the Prefinancing Security Deed (“PSD”). Pursuant to the PSD between MWFL, the MMB, the Security Trustee and NMRC, each MMB creates security interests over its interests in the Secured Assets in favour of the Security Trustee for the benefit of MWFL and the Noteholders. The obligations of the Issuer will be secured by a first ranking fixed charge over the Charged Assets, Charged Transaction Accounts and by a Security Assignment as detailed in the PSD. This notwithstanding, the prolonged Title perfection and cumbersome judicial processes in Nigeria remain risk factors.

The ratings accorded should not be viewed as a replacement of the legal advice that investors should seek on the validity and enforceability of the Transaction Documents.

NATIONAL SCALE RATINGS HISTORY


ANALYTICAL CONTACTS

Primary Analyst
Adekemi Adebambo
Senior Credit Analyst
.(JavaScript must be enabled to view this email address)
Lagos
+23 41 462 2545


Committee Chairperson
Dave King
Chairman
.(JavaScript must be enabled to view this email address)


APPLICABLE METHODOLOGIES AND RELATED RESEARCH

• Global Structured Finance Rating Criteria (Feb ’17);
• Global Asset Backed Commercial Paper Rating Criteria (Sep ’16);
• Citihomes Finance Company Limited Rating (Jul ’16);
• Nigeria Mortgage Refinance Company Plc Rating (Jul ’16);
• Nigeria Mortgage Refinance Company Plc Bond Rating (Aug ’16).


RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The Issuer and the Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to the Issuer and the ratings were contested.

The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.

The information received from Mortgage Warehouse Funding Limited and other reliable third parties to accord the indicative bond rating included: Draft MWFL CP Programme Memorandum, MWFL Memorandum and Articles of Association, Draft Management Services Agreement, Draft Deed of Covenant, Draft Issuing and Placing Agent Agreement, Draft Master Purchase, Pre-finance and Servicing Agreement, Draft Collecting and Paying Agent Agreement, Draft Pre-financing Security Deed, Draft Deed of Tripartite Legal Mortgage, Draft Liquidity and Asset Purchase Agreement, Draft Legal Opinion by G. Elias & Co, Independent legal opinion from Perchstone & Graeys (dated 13, December 2016).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES.  GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

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