Woolworths Holdings Limited · JSE:WHL

Woolworths — Debt Investor Presentation (February 2007)

48 slides from Woolworths's debt investor presentation, Feb 13, 2007

  1. Slide 1: Woolworths Retail Receivables Backed Note Programme Tap Issue

    Woolworths Retail Receivables Backed Note Programme Tap Issue Roadshow - 13 to 16 February 2007

  2. Slide 2: Disclaimer

    Disclaimer 2 The contents hereof and the other materials being provided to you (collectively hereafter referred to as “the information”) are intended only for information purposes. The information does not constitute an offer or the solicitation of an offer for, or advice (legal, tax, accounting or

  3. Slide 3: Contents

    Contents 3 ƒ Introduction 4 ƒ Overview of Woolworths Holdings Limited 5 ƒ Summary of the Proposed Securitisation Transaction 14 ƒ Salient Features of the Programme Structure 18 ƒ Credit Management of the Store Card Portfolio 26 ƒ Overview of the Store Card Portfolio 31 ƒ Comparative Debt Issues and

  4. Slide 4: Introduction

    Introduction 4 Securitisation of Woolworths Retail Credit Portfolio ƒ Woolworths established a R5bn asset-backed note programme in 2005 ƒ Assets comprise revolving retail receivables generated on the Woolworths in-store card product ƒ R 1.9 bn of notes were initially issued in June 2005 ƒ The progra

  5. Slide 5: Overview of Woolworths Holdings Limited

    Overview of Woolworths Holdings Limited

  6. Slide 6: Woolworths Holdings Limited – Financial Highlights

    Woolworths Holdings Limited – Financial Highlights 6 Summarised Income Statement (June 2006) HEPS andand HEPS DPS (June DPS 2006) ( 30 June 2006) 1800 12% 120 1500 10% 100 1200 8% 80 Rm 900 6% 60 600 4% 40 300 2% 20 0 0% 0 2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006 Operati

  7. Slide 7: Woolworths Holdings Limited – Financial Highlights

    Woolworths Holdings Limited – Financial Highlights 7 Summarised Balance Sheet (June 2006) Gearing (June 2006) 10,000.0 45% 8,000.0 36% 6,000.0 27% 4,000.0 18% 2,000.0 9% - 2000 2001 2002 2003 2004 2005 2006 0% 2000 2001 2002 2003 2004 2005 2006 Total assets Shareholders interest Competitor ROE 100%

  8. Slide 8: Woolworths Holdings Limited – 2006 A year of Change and Growth

    Woolworths Holdings Limited – 2006 A year of Change and Growth 8 ƒ Managing change ƒ systems and capacity ƒ implementation of merchandise management systems ƒ back office systems in stores ƒ distribution centre extensions ƒ people ƒ re-structure clothing ƒ improving capacity ƒ Managing growth ƒ volu

  9. Slide 9: Woolworths Holdings Limited – 2006 Trading Environment

    Woolworths Holdings Limited – 2006 Trading Environment 9 ƒ Consumer confidence high ƒ Food growth continues to gain market share ƒ Clothing inflation remains benign despite Rand weakness ƒ Rising inflation in foods based underlying commodity shortages ƒ Interest rate hikes ƒ Margin tightening due to

  10. Slide 10: Woolworths Holdings Limited – Corporate Strategy

    Woolworths Holdings Limited – Corporate Strategy 10 Retail Business Strategy ƒ Move toward putting the customer at the “centre of everything we do” ƒ Target customers at LSM 9-10 taste, with an offering accessible to “aspirational” LSM 6-8 customers ƒ Maximise cross-shop with multi-category stores (

  11. Slide 11: Woolworths Holdings Limited – Corporate Strategy

    Woolworths Holdings Limited – Corporate Strategy 11 Changes to the retail business model to support the strategy ƒ Accelerate real estate rollout focusing on delivering convenience in Food, but also growing the Woolworths footprint in Clothing and Home ƒ Grow margins in Foods and Clothing ƒ Grow lik

  12. Slide 12: Clothing and Home - Strategic Forward Focus

    Clothing and Home - Strategic Forward Focus 12 Key focus areas LSM 9&10 taste-level fashion 20% - entrench men's and childrenswear - improve homeware Strategic sourcing key - childrenswear value - lingerie value and technology 80% Core availability core - key focus Cross shop - entrench beauty - mai

  13. Slide 13: Woolworths Opportunity – Driving the Cross-Shop

    Woolworths Opportunity – Driving the Cross-Shop 13 Key value items & foods new stores w-collection clothing and home beauty financial visa services LSM 6 7 8 9 10

  14. Slide 14: Summary of Proposed Securitisation Transaction

    Summary of Proposed Securitisation Transaction

  15. Slide 15: Participants

    Participants 15 ƒ Woolworths ƒ Originator ƒ Servicer ƒ Subordinated Lender ƒ Subordinated Liquidity Facility Provider ƒ Standard Bank ƒ Arranger and Lead Manager ƒ Hedge Counterparty ƒ Back-Up Service Plan Facilitator ƒ Rating Agency ƒ Moody’s Investor Services ƒ Fitch Ratings provided a credit asse

  16. Slide 16: Indicative Terms – Initial Issue February 2005

    Indicative Terms – Initial Issue February 2005 16 Issuer : Account on Us (Pty) Ltd Initial Issuance : R1.9 bn Tranching Class A : 85% Subordinated Loan : 15% Coupon Frequency : Quarterly on 25 February, May, August and November of each year Step Up Coupon : 150 bps (Approximately 4 times multiple of

  17. Slide 17: Indicative Terms of the Tap Issue

    Indicative Terms of the Tap Issue 17 Issuer : Account on Us (Pty) Ltd Issuance Amount : Up to R 1 bn Tranching: Levels Rating Class A : [78% - 80%] [AAA/Aaa.za] Class B : [ 2% - 7%] [AA-] Coupon Frequency : Quarterly on 25 February, May, August and November of each year Step Up Coupon : 150 bps Cred

  18. Slide 18: Salient Features of the Programme Structure

    Salient Features of the Programme Structure

  19. Slide 19: Structure Diagram

    Structure Diagram 19 Collections Usury vs Jibar Swap Hedge Woolworths Sale The Issuer Counterparty of receivables Proceeds from Note Issue Class A Notes Initial Rated Pool Class B Notes Subordinated Loan Originator Facility Growth in Asset Pool Credit Enhancement: Class B Notes, Subordinated Loan, E

  20. Slide 20: Sale of Receivables to the Issuer

    Sale of Receivables to the Issuer 20 ƒ On the Initial Issue Date, Woolworths sold all receivables on initial eligible accounts (the “Rated Accounts/Pool”) on its in-store card portfolio to the Issuer on a non-recourse basis ƒ The purchase of the assets was funded from the proceeds of the Initial Iss

  21. Slide 21: Time Control Features

    Time Control Features 21 Revolving period ƒ The Programme will continue to purchase further receivables on the Rated Pool from collections received as long as rated notes remain outstanding and no early amortisation triggers have been breached ƒ Cash flows are allocated in terms of the Revolving Per

  22. Slide 22: Credit Enhancement Structure

    Credit Enhancement Structure 22 Amendment to the credit structure ƒ Previously the structure received credit enhancement from the 15% Subordinated Loan as well as excess spread via a total return swap in terms of which the effective yield on the assets was swapped out for a rate equivalent to 3m Jib

  23. Slide 23: Credit Structure

    Credit Structure 23 Early amortisation triggers ƒ The corporate rating of Woolworths is downgraded to below Ba1.za / BB+.zaf ƒ The 3-monthly average Monthly Gross Charge Off Rate > 1.25% ƒ The 3-monthly average Monthly Payment Rate < 8.7% (Previously 7.5%) ƒ Attrition: Performing Assets < 75% ƒ Prin

  24. Slide 24: Credit Strength of the Originator

    Credit Strength of the Originator 24 As the majority of in-store card customers make payment in the stores, the securitisation programme relies on the credit strength of Woolworths and the ongoing ability of the company to generate receivables and take receipt of payments from customers in stores Th

  25. Slide 25: Credit Strength of the Originator

    Credit Strength of the Originator 25 Back-Up servicer plan ƒ Standard Bank has been appointed as Back-Up Service Facilitator to implement the Back-Up Servicer Plan in the event of a Servicer default or a downgrade of Woolworths to Baa3.za /BBB-.zaf ƒ The Back-Up Servicer Plan sets out all steps to b

  26. Slide 26: Credit Management of the Store Card Portfolio

    Credit Management of the Store Card Portfolio

  27. Slide 27: Terms of the Store Card Product and Credit Risk Management

    Terms of the Store Card Product and Credit Risk Management 27 Credit terms ƒ One product ƒ Up to 55 days interest free ƒ Minimum monthly payment of 10% or R 25 (whichever is greater) ƒ Balances not paid by due date (25 days following statement date) are charged interest at the prevailing Usury rate

  28. Slide 28: Credit Risk Management

    Credit Risk Management 28 Ageing and Charge Off Policies ƒ Customers that do no pay minimum payments by due date are aged to the next Delinquency Cycle (DC) ƒ Accounts are aged monthly on billing date and updated based on payment activity between billing dates ƒ Credit lines on accounts aged to DC2

  29. Slide 29: Dynamic Risk Management

    Dynamic Risk Management 29 ƒ Risk Management ƒ The credit risk and credit management functions are managed by Woolworths Financial Services (“WFS”) and evaluated on a monthly basis by a credit forum attended by various WFS functional heads and members of the Woolworths Board ƒ The store card portfol

  30. Slide 30: National Credit Act

    National Credit Act 30 ƒ Implementation date is on 1 June 2007 ƒ Under the Act the Issuer SPV has applied to be a credit provider ƒ The Act will have the following impact on Woolworths: ƒ Amendment of contract terms and conditions for new customers ƒ Credit limits will not be automatically approved

  31. Slide 31: Overview of the Store Card Receivables Portfolio

    Overview of the Store Card Receivables Portfolio

  32. Slide 32: Overview of the Woolworths Receivables Portfolio

    Overview of the Woolworths Receivables Portfolio 32 ƒ Woolworths initiated the in-store card product in 1993 ƒ Increased growth over the past five years ƒ Strategy going forward – Woolworths aims to build customer relationships through direct marketing and loyalty programmes, while still maintaining

  33. Slide 33: Historical Performance of the Total Woolworths Receivables Portfolio

    Historical Performance of the Total Woolworths Receivables Portfolio 33 Historical yield vs Usury rate 40% 35% 30% 25% 20% 15% 98 99 00 01 02 03 04 05 06 8 9 0 1 2 3 4 5 6 -9 -9 -0 -0 -0 -0 -0 -0 -0 n- n- n- n- n- n- n- n- n- ec ec ec ec ec ec ec ec ec Ju Ju Ju Ju Ju Ju Ju Ju Ju D D D D D D D D D Ef

  34. Slide 34: Historical Performance of the Total Woolworths Receivables Portfolio

    Historical Performance of the Total Woolworths Receivables Portfolio 34 Monthly Payment and Purchase Rates 20% 18% 16% 14% 12% 10% 98 99 00 01 02 03 04 05 06 8 9 0 1 2 3 4 5 6 -9 -0 -0 -0 -0 -0 -9 -0 -0 n- n- n- n- n- n- n- n- n- ec ec ec ec ec ec ec ec ec Ju Ju Ju Ju Ju Ju Ju Ju Ju D D D D D D D D

  35. Slide 35: Historical Performance of the Total Woolworths Receivables Portfolio

    Historical Performance of the Total Woolworths Receivables Portfolio 35 Ageing as at December 2006 Historical ageing on a quarterly basis 100% DC6 DC5 1.0% 90% DC01 Average 1.2% 20% DC4 1.6% 80% Current DC3 70.7% 2.4% 70% DC00 Average DC2 69% 4.7% 60% 50% DC1 9 0 1 2 3 4 5 6 98 99 00 01 02 03 04 05

  36. Slide 36: Historical Performance of the Woolworths Receivables Portfolio

    Historical Performance of the Woolworths Receivables Portfolio 36 Historical Charge Off Rates (annualised monthly rate) 10% 8% 6% 4% 2% 0% 98 99 00 01 02 03 04 05 06 8 9 0 1 2 3 4 5 6 -9 -9 -0 -0 -0 -0 -0 -0 -0 n- n- n- n- n- n- n- n- n- ec ec ec ec ec ec ec ec ec Ju Ju Ju Ju Ju Ju Ju Ju Ju D D D D

  37. Slide 37: Overview of the Account On Us Receivables Portfolio

    Overview of the Account On Us Receivables Portfolio 37 Current Pool Additional Assets Combined Balance Outstanding R 2,386,288,266 R 767,354,778 R 3, 163,643,044 Total Credit Limit R 6,249,656,732 R 1,517,606,275 R 7,767,263,007 Average Balance R 2,655 R 1,824 R 2,397 Average Credit Limit R 6,950 R

  38. Slide 38: Overview of the Account On Us Receivables Portfolio

    Overview of the Account On Us Receivables Portfolio 38 Balance bands 45% 36% 27% 18% 9% 0% < R 1000 R 1001-2000 R 2001 -4000 R 4001-6000 R 6001 -8000 R 8001-10000 > R 10000 Securitised Non-Securitised Combined Credit limit bands 75% 60% 45% 30% 15% 0% <=R 1000 R 2,000 R 3,000 R 4,000 R 5,000 R 7,000

  39. Slide 39: Overview of the Account On Us Receivables Portfolio

    Overview of the Account On Us Receivables Portfolio 39 Geographical distribution 50% 40% 30% 20% 10% 0% Eastern Cape Free State Gauteng KZN Limpompo Mpumalanga North West Northern Cape Unknow n Western Cape Securitised Non-Securitised Combined Age of account holders 45% 36% 27% 18% 9% 0% 18 ~ 24 25

  40. Slide 40: Overview of the Account On Us Receivables Portfolio

    Overview of the Account On Us Receivables Portfolio 40 Account age / Seasoning (months) 70% 60% 50% 40% 30% 20% 10% 0% 6 12 18 24 30 36 42 48 54 60 66 72 72+ Securitised Non-Securitised Combined

  41. Slide 41: Comparative Debt Issues and Relative Value

    Comparative Debt Issues and Relative Value

  42. Slide 42: Comparative Debt Issues

    Comparative Debt Issues 42 ƒ The only comparable transaction in the market is Edcon’s “On the Cards” transaction ƒ Initial issue – 29 July 2002 – R1,93bn ƒ Conversion to DMTN Programme – 15 June 2004 ƒ Total Issuance to date – R 3.465 bn ƒ Comparative attributes of the asset pool On the Cards* Accou

  43. Slide 43: Comparative Debt Issues – Credit Enhancement Mechanisms

    Comparative Debt Issues – Credit Enhancement Mechanisms 43 Comparative credit structure On the Cards Account on Us Eligibility Criteria Seasoning 12 Months + 1 installment received 6 months + 1 installment received Delinquency None Accounts in arrears > 120 days ineligible Early Amortisation Trigger

  44. Slide 44: Notes and Pricing

    Notes and Pricing 44 AAA Relative Value – Recent ABS Transactions Spread over Issue Tenor Indicative Pricing for Class A notes 3m Jibar at issue date Issue Date: 5 March 2007 On The Cards – CARDA9 33 Jun 2006 3 Rating: Aaa.za / AAA.zaf Account on us – BAG1A1 36 Feb 2005 4 Term: 4 years Accelerator F

  45. Slide 45: Timing

    W/ WOOLWORTHS the difference Timing i) Standard Bank

  46. Slide 46: Timing

    Timing 46 Transaction Diary ƒ Timing 28 February 2007 ƒ Auction Method: Bookbuild Method with full feedback Class B allocation subject to AAA support where necessary ƒ Contact All bids to be placed on Tel: 011 378 7241 Settlement: 5 March 2007 ƒ First Coupon: 25 May 2007 ƒ Other Key Dates: 15 Februa

  47. Slide 47: Contacts

    W/ WOOLWORTHS the difference Contacts i) Standard Bank

  48. Slide 48: Contacts

    Contacts 48 Standard Bank transaction team: Megan McDonald Structuring: Director: Securitisation Armine Schaefer Zoya Sisulu Tel: (011) 378 7004 Tel: (011) 378 8106 Tel: (011) 378 7032 Fax: (011) 378 7009 Fax: (011) 378 7009 Fax: (011) 378 7009 Cell: 083 460 6447 Cell: 082 338 3919 Cell: 082 782 794

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