GCR Ratings believes the performance of securitisation transactions may be impacted by the relief solutions offered by the South African Financial Institutions to their clients amid the COVID-19 pandemic. While the aim is for the long-term sustainability of their clients and the economy, the exact impact remains unclear.In the short to medium term, Equipment Lease ABS rated by GCR have sufficient cash reserves to withstand potential cash flow disruptions.
Generally, most of the transaction documents for the Equipment Lease ABS rated by GCR do not allow for restructuring of payments, notwithstanding the underlying lease agreement. Therefore, such payment holidays would be deemed to be in arrears or NPLs (depending of the NPL definition of each transaction). NPL related covenants which are already under pressure and which may trigger the amortisation of the notes will be strained further in such a scenario.