March 9, 2017 / 5:24 AM / 5 months ago

Fitch Affirms Two Series REDS EHP Transactions; Outlook Stable

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(The following statement was released by the rating agency) SYDNEY, March 09 (Fitch) Fitch Ratings has affirmed 10 tranches from two Series REDS EHP Trust transactions. The transactions are securitisations of first-ranking small-balance auto and equipment loans and leases originated by Bank of Queensland Equipment Finance Ltd, whose ultimate parent is Bank of Queensland (A-/Stable/F2). The rating actions are listed at the end of this commentary. KEY RATING DRIVERS The affirmations reflect Fitch's view that available credit enhancement is sufficient to support the notes at their current rating levels; the stable credit quality and performance of the pool; and Fitch's expectations of Australia's economic conditions. The transactions' performance falls within Fitch's base-case expectations. Net losses experienced since closing were 1.36% for Series 2014-1 REDS EHP Trust and 0.71% for Series 2015-1 REDS EHP Trust as at end-January 2017; 30+ days arrears were 2.10% and 0.77%, respectively. Series 2014-1 experienced a charge-off to the seller note in September 2016, which was fully paid off in the following month using excess spread. Due to the charge-off, the transaction reverted to sequential pay for one month, which led to an increase in the subordination available to the rated notes. With the exception of this charge-off, excess spread has been more than sufficient to cover losses experienced in Series 2014-1 and Series 2015-1. RATING SENSITIVITIES Fitch considers the prospect for downgrades as remote, given the level of subordination and excess spread available on all transactions. A significant and unexpected increase in delinquencies, defaults and losses would be necessary before any negative rating action would be considered. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio as part of its ongoing monitoring. As part of its ongoing monitoring, Fitch reviewed a small targeted sample of Bank of Queensland Equipment Finance Ltd's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by Bank of Queensland Equipment Finance Ltd as at January 2017 Transaction reporting data provided by Bank of Queensland Equipment Finance Ltd as at January 2017 Loan enforcement details provided by Bank of Queensland Equipment Finance Ltd as at January 2017. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. The full list of rating actions is shown below (note balances are as at 31 January 2017: Series 2014-1 REDS EHP Trust: AUD184.5 million Class A (ISIN AU3FN0024766) notes affirmed at 'AAAsf'; Outlook Stable AUD14.6 million Class B (ISIN AU3FN0024774) notes affirmed at 'AAsf'; Outlook Stable AUD17.2 million Class C (ISIN AU3FN0024782) notes affirmed at 'Asf'; Outlook Stable AUD8.0 million Class D (ISIN AU3FN0024790) notes affirmed at 'BBBsf'; Outlook Stable AUD8.3 million Class E (ISIN AU3FN0024808) notes affirmed at 'BBsf'; Outlook Stable Series 2015-1 REDS EHP Trust: AUD295.1 million Class A (ISIN AU3FN0028916) notes affirmed at 'AAAsf'; Outlook Stable AUD30.0 million Class B (ISIN AU3FN0028924) notes affirmed at 'AAsf'; Outlook Stable AUD24.9 million Class C (ISIN AU3FN0028932) notes affirmed at 'Asf'; Outlook Stable AUD12.4 million Class D (ISIN AU3FN0028940) notes affirmed at 'BBBsf'; Outlook Stable AUD13.0 million Class E (ISIN AU3FN0028957) notes affirmed at 'BBsf'; Outlook Stable Contacts: Lead Surveillance Analyst Hai Duong Le Associate Director +61 2 8256 0358 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney, NSW 2000 Australia Committee Chairperson Atsushi Kuroda Senior Director +81 3 3288 2692 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016) here Global Consumer ABS Rating Criteria (pub. 01 Dec 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here SME Balance Sheet Securitisation Rating Criteria (pub. 03 Mar 2017) here Related Research Series 2014-1 REDS EHP Trust here Series 2015-1 REDS EHP Trust here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020268 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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