OREANDA-NEWS. March 16, 2015. Fitch Ratings has assigned final ratings to Medallion Trust Series 2015-1's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential mortgages originated by Commonwealth Bank of Australia Limited (CBA, AA-/Stable/F1+). The ratings are as follows:

AUD1,840m Class A1 notes: 'AAAsf'; Outlook Stable;
AUD120m Class B notes: 'A+sf'; Outlook Stable; and
AUD40m Class C notes: 'NRsf'.

The notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of Medallion Trust Series 2015-1.

At the cut-off date, the portfolio contained loans that have been conservatively underwritten. The weighted-average (WA) seasoning is 25.7 months, with a WA unindexed loan/value ratio (LVR) of 59.2% and WA Indexed LVR of 57.8%. The average obligor current loan size is AUD301,159; investment loans represent 23.5% of the pool by balance, and interest-only loans represent 17.2%.

KEY RATING DRIVERS
The transaction includes a pass-through note (Class A1) with actual credit enhancement of 8.0%. At the refinancing date of March 2020, the note will either be redeemed by issuance of pass-through floating rate class A1-R notes or the margin on the Class A1 notes will step up by 25bp.

Interest is paid sequentially (after expenses) towards the Class A1, B and then C notes. The reimbursement of all losses is paid after the distribution of interest on Class B notes. Principal will be allocated pro rata towards the Class A1 and B notes, should certain conditions be met.

Liquidity support will be provided via excess spread, principal draws and a liquidity facility sized at 0.75% of the notes' balance, with a facility floor of AUD1.5m. The liquidity facility will amortise, subject to the floor, while performance-based triggers are satisfied.

CBA has considerable experience in mortgage lending and servicing. It originates loans through its nationwide branch network, mobile sales force, online and telephone sales operations, and third-party mortgage brokers. The arrears level of securitised Medallion transactions has historically tracked in line or below Fitch's Dinkum Index for prime RMBS.

RATING SENSITIVITIES
Unexpected decreases in residential property value, increases in the frequency of foreclosures, and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base case, which could result in negative rating actions on the notes. Fitch has evaluated the sensitivity of the ratings assigned to Medallion Trust Series 2015-1 to increased defaults and decreased recovery rates over the life of the transaction. However, its analysis found that the Class A1 notes' ratings remained stable under the mild and severe default and recovery scenarios.

The analysis found the Class B notes' ratings were sensitive to the mild and severe default and recovery scenarios. Under an increased default stress of 15% and 30% the Class B rating declined to 'Asf' and 'A-sf' respectively. Under a reduced recovery rate stress of 15% and 30%, the Class B rating declined to 'A-sf' and 'BBBsf' respectively. The rating was severely impacted by the combination scenario of 15% and 30% increased defaults and 15% and 30% decrease in recovery rates, with ratings at 'BBB+sf' and 'BBsf' respectively.

The transaction structure supports a lenders' mortgage insurance (LMI) independent rating for the Class A1 notes. Therefore LMI is not required to support the rating due to the level of credit support provided by the lower notes.

Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "Medallion Trust Series 2015-1", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.

Contacts:

Primary Analyst
Courtney Miller
Associate Director
+612 8256 0347
Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000

Secondary Analyst
Spencer Wilson
Associate Director
+612 8256 0320

Committee Chairperson
Ben McCarthy
Managing Director
+612 8256 0388

The source of information identified for this rating action was informed by information from CBA, as arranger and the issuer's counsel King & Wood Mallesons. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.

Applicable criteria, "Global Structured Finance Rating Criteria", dated 4 August 2014; "Counterparty Criteria for Structured Finance and Covered Bonds", dated 14 May 2014; "Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum", dated 14 May 2014; "APAC Residential Mortgage Criteria", dated 23 June 2014; "APAC Residential Mortgage Criteria Addendum - Australia", dated 23 June 2014; and "Global Criteria for Lender's Mortgage Insurance in RMBS", dated 23 June 2014 are available at www.fitchratings.com.

Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: iselle.gonzalez@fitchratings.com.

Additional information is available at www.fitchratings.com.