March 5, 2017 / 10:51 PM / 5 months ago

Fitch Assigns Expected Ratings to TORRENS Series 2017-1 Trust

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: TORRENS Series 2017-1 Trust here SYDNEY, March 05 (Fitch) Fitch Ratings has assigned expected ratings to TORRENS Series 2017-1 Trust's mortgage-backed floating-rate notes. The issuance consists of notes backed by Australian residential mortgages originated by Bendigo and Adelaide Bank Limited (BEN, A-/Stable/F2). The ratings are as follows: AUD460.0m Class A1 notes: 'AAA(EXP)sf'; Outlook Stable AUD16.5m Class A2 notes: 'AAA(EXP)sf'; Outlook Stable AUD10.5m Class AB notes: 'AAA(EXP)sf'; Outlook Stable AUD7.0m Class B notes: 'AA(EXP)sf'; Outlook Stable AUD3.5m Class C notes: 'A(EXP)sf'; Outlook Stable AUD2.5m Class D notes: 'NR(EXP)sf' The notes will be issued by Perpetual Trustee Company Limited in its capacity as trustee of TORRENS Series 2017-1 Trust. The total collateral pool consisted of 1,841 loans, totalling AUD500m at the 7 February 2017 cut-off date. The loan pool will be finalised prior to the closing date and adjusted to match the final liability balance. KEY RATING DRIVERS Sufficient Credit Support: The class A1 and A2 notes benefit from credit enhancement (CE) of 8.0% and 4.7%, respectively, provided by the subordinated notes. This is sufficient to support the ratings independent of credit provided by lenders' mortgage insurance (LMI). The class AB, B and C notes benefit from CE of 2.6%, 1.2% and 0.5%, respectively, provided by their respective subordinated notes and LMI. Pool Characteristics: The portfolio has weighted-average (WA) seasoning of 32 months; with a WA unindexed loan/value ratio (LVR) of 64.0% and WA indexed LVR of 61.8%. The average obligor current loan size is AUD271,495. Investment loans represent 11.4% of the pool by balance and interest-only loans represent 11.0%. LMI is present on 100% of the pool. Multiple Liquidity Sources: Liquidity support will be provided via excess income; an excess revenue reserve that traps excess income up to a target balance of 0.25% of the note balance at closing; principal draws; and a liquidity facility sized at 0.85% of the note balance, with a facility floor of 0.085%. Liquidity will be available to all note classes, however, charge-off triggers will restrict liquidity to the rated notes only. Available Replacement Counterparties: Counterparty default risk is mitigated by the appointment of National Australia Bank Limited (AA-/Stable/F1+) as an eligible standby fixed/floating-rate swap provider. EXPECTED RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in CE and remaining loss-coverage levels available to the notes. Decreased CE may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis of the ratings by stressing the transaction's initial base-case assumptions. Its analysis found that the expected ratings of the class A1, A2, AB, B and C notes were not affected under Fitch's moderate or severe foreclosure stress (15% and 30% increase) scenarios. The analysis of the recovery scenarios found that the expected ratings of the class AB, B and C notes were affected under Fitch's moderate and severe recovery (15% and 30% decrease) scenarios: the expected ratings of the class AB notes decreased to 'AA+sf' and 'AA-sf', respectively; the expected ratings of the class B notes decreased to 'BBB+sf' and 'CCCsf' or below; and the expected ratings of the class C notes decreased to 'CCCsf' or below under both scenarios. The class A1 and A2 notes were not affected under either a moderate or severe recovery stress scenario. The class AB, B and C notes showed sensitivity to Fitch's moderate combination stress of 15% increase in defaults and 15% decrease in recoveries and Fitch's severe combination stress of 30% increase in defaults and 30% decrease in recoveries: the expected ratings of the class AB note decreased to 'AA+sf' and 'Asf', respectively; the expected ratings of the class B note decreased to 'BBBsf' and 'CCCsf' or below; and the expected ratings of the class C note reduced to 'CCCsf' or below under both combination stress scenarios. The expected ratings of the class A1 and A2 notes were not affected under Fitch's moderate combination stress in defaults and recoveries, but reduced to 'AA+sf' under Fitch's severe combination stress. The transaction structure supports an LMI independent rating for the class A1 and A2 notes; therefore, LMI is not required to support the rating due to the level of credit support provided by the lower notes. 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. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) disclosed in the offering document that relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016. DATA ADEQUACY As part of its ongoing monitoring, Fitch reviewed a small targeted sample of BEN'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. Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was made available. 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. Key rating drivers and expected rating sensitivities are further discussed in the corresponding presale report entitled "TORRENS Series 2017-1 Trust", published today. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by BEN as at 22 February 2017 Transaction documentation provided by King & Wood Mallesons, the issuer's counsel. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst Brenden Asplin, CFA Associate Director +612 8256 0340 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 2000 Secondary Analyst Chris Stankovski Director +612 8256 0341 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 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 APAC Residential Mortgage Criteria (pub. 30 Aug 2016) here 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 Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 28 Jul 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here TORRENS Series 2017-1 Trust - Appendix here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020066 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. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. 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