The Standard Bank of South Africa intends to restructure the Thekwini Conduit, which issues CP notes. Fitch is currently remodelling and re-evaluating the proposed structure in terms of its current RMBS and ABCP criteria.

As of end-September 2009, Thekwini Conduit had at total of ZAR3.16bn CP notes outstanding, split between ZAR3.06bn CP notes rated F1+(zaf), ZAR50.7m notes rated F1(zaf) and ZAR52.6m notes rated F2(zaf). The conduit benefits from a subordinated loan sized at just over ZAR82m.

Thekwini Conduit is a single-seller ABCP conduit backed by mortgage loans originated in South Africa by SA Home Loans (SAHL). The conduit issues various tranches of CP to fund the purchase of mortgage loans.

CP investors are exposed to the risk that mortgage loans default during the term of the CP and that such defaults exhaust the level of credit enhancement then available in the conduit. The conduit defines a defaulted mortgage loan as one that is more than three months in arrears. Mortgage delinquencies have risen over the past two years in South Africa in response to high interest rates and the economic recession.

Nevertheless, the arrears in Thekwini Conduit have remained at fairly low levels, mainly because SAHL has tended to buy defaulted mortgage loans out of the pool. However, SAHL has no obligation to do this under the terms of the transaction documents.