32616 - CustomCapitalSPV

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Summary of Investment Information

Project Number

32616

Company Name

CUSTOM CAPITAL (PTY) LTD

Date SPI Disclosed

Mar 25, 2013

Country

South Africa

Region

Africa

Projected Board Date

Apr 30, 2013

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : May 16, 2013
Signed : May 31, 2013
Invested : Feb 5, 2014

Sector

Leasing Services

Project Description

The project consists of IFC supporting the establishment of a securitization program of SME equipment rental contracts originated and serviced by Custom Capital (Pty) Ltd (“CC”), an equipment rental company acquired by Mercantile Bank Limited (“MBL”) in 2011. Initially the portfolio size is proposed to be approx. ZAR 350 million, but is expected to grow over time.

Under the project, IFC would purchase a ZAR denominated senior note of up to ZAR 240 million to a newly created, bankruptcy-remote SPV. Custom Capital ("CC") would retain the subordinated notes.

IFC’s investment ensures initial funding to the SPV with a revolving portfolio of equipment rentals for a period of up to 3 years, after which the programme is expected to issue public securities in the South African capital market.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	26.76
Equity

Development Impact

1. Increased access to finance: IFC''s investment will enable the company increase access to finance for SMEs, its major clients. Access to equipment finance benefits SME''s by improving their cash management and operational efficiency.
2. Catalytic role: IFC will help to demonstrate the strength of Custom Capital business and enable it to build the two to three year track record required to successfully access the capital markets and broaden its investor base. The transaction would further provide a demonstration effect and further establish SME leases as an asset class in the South African capital market.

1. Best Practice: IFC will lend its experience and knowledge as follows: (a) As a structuring investor, IFC can provide structuring experience from many other securitization transactions around the world, and its presence would provide additional comfort to future investors. (b) IFC will bring its experience and contacts in leasing to the project to help CC strengthen its operations.
2. Long term partnership: This transaction contributes to the long term partnership intended with Mercantile Bank and will assist the bank in extending access to finance to SMEs.

E&S Category Rationale / Risks and Mitigation

The project has been classified as a Category FI-2 project according to IFC’s Environmental and Social Review Procedure. Custom Capital provides rental finance to SME clients mostly in low to medium risk sectors which typically have limited adverse environmental or social risks or impacts that are largely reversible, and readily addressed through mitigation measures. The overall portfolio risk is considered medium. The Applicable Performance Requirements for the project are the Exclusion List and the applicable National Environmental and Social Laws in South Africa.

The main E&S risks and impacts relate to the company’s ability to identify and manage the risks associated with its rental finance activities. During appraisal, IFC analyzed the FI portfolio for types of finance provided and industry sectors covered, and analyzed the potential social and environmental risks associated with the company''s activities as well as the company’s existing risk management procedures. The company’s portfolio consists mostly of leases to clients in low to medium risk sectors which typically have limited adverse environmental or social risks or impacts; the company however has no E&S risk management procedure and no E&S staff. Custom Capital is a subsidiary of Mercantile Bank, an IFC client with a satisfactory E&S management system. The company will be required to adopt the Mercantile Bank management system and adapt it to suit its operations. Custom’s Capital compliance with PS2 on labor and working conditions was also reviewed during appraisal; the company will be required to align its HR policies and procedures with Mercantile Bank’s processes.

Contacts

For Inquiries About the Project, Contact

Mr. Karl Kumbier
Chairman
Custom Capital
142 West Street, Sandown Johannesburg, 2196, South Africa
Phone: 011 302 0300
Fax: 011 883 7765

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2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster

Local Access of Project Documentation

Custom Capital
18 Bute Road, Durban, 4001
South Africa

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

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Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Title & Description	Anticipated Completion Date
Nominate officers
Establish SEMS
Formalize procedures
Staff Training

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