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Fitch Assigns Expected Ratings to TORRENS Series 2017-1 Trust
March 5, 2017 / 10:51 PM / 9 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: Additional information is available on 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. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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