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Fitch Assigns Expected Ratings to Crusade ABS Series 2017-1 Trust
February 14, 2017 / 11:25 PM / 10 months ago

Fitch Assigns Expected Ratings to Crusade ABS Series 2017-1 Trust

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Crusade ABS Series 2017-1 Trust here SYDNEY, February 14 (Fitch) Fitch Ratings has assigned expected ratings to Crusade ABS Series 2017-1 Trust's floating-rate notes. The issuance consists of notes backed by automotive lease and loan receivables originated by Westpac Banking Corporation (Westpac, AA-/Stable/F1+). The ratings are as follows: AUD607.50m Class A1/A2 notes: 'AAA(EXP)sf'; Outlook Stable AUD37.50m Class B notes: 'AA+(EXP)sf'; Outlook Stable AUD30.00m Class C notes: 'A(EXP)sf'; Outlook Stable AUD21.00m Class D notes: 'BBB(EXP)sf'; Outlook Stable AUD12.75m Class E notes: 'BB(EXP)sf'; Outlook Stable AUD41.25m Seller notes: 'NR(EXP)sf' The class A1 and A2 notes' final allocation will be determined at the pricing date The notes will be issued by Perpetual Corporate Trust Limited in its capacity as trustee of Crusade ABS Series 2017-1 Trust. The collateral backing the Crusade ABS 2017-1 transaction, statistically, is of similar credit-quality to prior pools securitised under the Crusade ABS programme. The total collateral pool consisted of receivables backed by motor vehicles with a weighted-average (WA) seasoning of 10.1 months and average receivable size of AUD26,733 at the 30 November 2016 cut-off date. The WA balloon residual percentage - percentage of the original outstanding balance of the receivable - is 7.1%. KEY RATING DRIVERS Asset Origination: The receivables will be sourced from Westpac, as the lender of record, and are reviewed under the same central credit policy. The servicer of record is Westpac. Collections are outsourced to Collection House Ltd and overseen by Westpac. Consumer Finance Composition: Consumer finance receivables comprise 57.3% of the portfolio. Consumer finance has higher loss levels than other product types and longer lease terms of up to 85 months. Fitch has taken this into account in the rating analysis. Low Historical Defaults: The receivables book has experienced relatively low levels of defaults to date, with the majority of quarterly vintage gross loss percentages ranging from 1.3%-3.8% for passenger vehicles. Delinquencies greater than 30 days have generally tracked below 3.0%. Eligibility and Pool Parameters: A substitution period of 12 months will allow receivables to be sold to the trust on a regular basis, subject to eligibility and pool parameters to ensure consistent portfolio characteristics. All substitutions will cease upon unreimbursed charge-offs exceeding 1%, if an event of default or servicer termination event subsists, or if the average percentage of loans more than 90 days in arrears over the prior three months exceeds 3%. 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, likely resulting in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Fitch has evaluated the sensitivity of the ratings assigned to Crusade ABS Series 2017-1 to increased gross default levels and decreased recovery rates over the life of the transaction. Expected impact upon the note rating of increased defaults: Expected rating: AAAsf/AA+sf/Asf/BBBsf/BBsf Increase defaults by 10%: AAAsf/AAsf/A-sf/BB+sf/B+sf Increase defaults by 25%: AA+sf/AA-sf/A-sf/BB+sf/Bsf Increase defaults by 50%: AA-sf/Asf/BBBsf/BBsf/Bsf Expected impact upon the note rating of decreased recoveries: Expected rating: AAAsf/AA+sf/Asf/BBBsf/BBsf Reduce recoveries by 10%: AAAsf/AA+sf/Asf/BBB-sf/BB-sf Reduce recoveries by 25%: AAAsf/AA+sf/A-sf/BB+sf/B+sf Reduce recoveries by 50%: AAAsf/AAsf/A-sf/BB+sf/Bsf Expected impact upon the note rating of multiple factors: Expected rating: AAAsf/AA+sf/Asf/BBBsf/BBsf Increase defaults by 10%; reduce recoveries by 10%: AA+sf/AAsf/A-sf/BB+sf/B+sf Increase defaults by 25%; reduce recoveries by 25%: AA+sf/A+sf/BBBsf/BBsf/B+sf Increase defaults by 50%; reduce recoveries by 50%: A+sf/A-sf/BB+sf/Bsf/CCCsf 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 conducted a review of a small targeted sample of Westpac'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 "Crusade ABS Series 2017-1 Trust", published today. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by Westpac as at 30 November 2016 Loss and recovery data provided by Westpac as at 31 December 2016. 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 James Leung Director +612 8256 0322 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney, NSW 2000 Secondary Analyst Brenden Asplin, CFA Associate Director +612 8256 0340 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available at 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 Related Research Crusade Series ABS 2017-1 Trust - Appendix here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1018998 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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