Fitch Maintains 2 Investec Funds on Rating Watch Negative
Fitch has simultaneously affirmed Investec Money Market Fund's and Investec SteFI Plus Fund's National Fund Volatility Ratings at 'V1(zaf)' and 'V2(zaf)', respectively.
KEY RATING DRIVERS
The RWN is driven by the funds' exposure to African Bank following the bank's receipt of emergency support on 10 August 2014 from the South African Reserve Bank. As a result, holders of senior and wholesale debt instruments issued by African Bank had their holdings written down to 90% of face value while subordinated instruments were written down to zero (as mandated by the regulators). The RWN reflects the potential for further credit deterioration or negative effects on instrument prices, pending the completion of the resolution of African Bank.
Investec Money Market fund had 1% exposure to African Bank across two senior debt instruments, both of which matured in 2014, as of end-January 2016. These instruments have not yet been paid out, pending the resolution of African Bank. Investec SteFI Plus Fund had exposure of 3.8%, comprising a majority of senior instruments which have matured and a minority of longer-dated subordinated instruments.
Fitch will resolve the RWN when the continuing uncertainty regarding African Bank's credit profile has been removed. We expect this to be on or around 4 April 2016 when there will be an exchange of notes from African Bank to the newly established "good" African Bank.
The affirmation of the National Fund Volatility Ratings is driven by the stability of the funds' market risk profiles, consistent with the ratings.
Fitch will affirm the National Fund Credit Quality Ratings when uncertainty regarding African Banks's credit profile - and its resulting impact on the funds' credit profiles - has been resolved. This is provided the current and prospective credit quality of the funds, taking into consideration the credit profile of residual African Bank exposures - once the bank has been resolved and instrument exchange has taken place - are consistent with the ratings.
The agency will base its assessment of current credit quality on the funds' weighted average rating factors and rating distributions and the prospective credit quality on observed fund behaviour and the funds' investment guidelines.
Fitch will downgrade the National Fund Credit Quality Ratings in the event that the credit profile or pricing of African Bank instruments deteriorates, resulting in a material negative impact on investors.