15.06.2015, 13:24
Fitch Assigns Expected Ratings to Flexi ABS Trust 2015-2
OREANDA-NEWS. Fitch Ratings has assigned expected ratings to Flexi ABS Trust 2015-2's asset-backed floating-rate notes. The issuance consists of notes backed by small balance unsecured consumer loans originated by Certegy Ezi-Pay Pty Ltd (Certegy) whose ultimate parent is FlexiGroup Limited. The ratings are as follows:
AUD100m Class A1 notes: 'F1+(EXP)sf';
AUD125.1m Class A2 notes: 'AAA(EXP)sf'; Outlook Stable;
AUD17.1m Class B notes: 'AA(EXP)sf'; Outlook Stable;
AUD12.85m Class C notes: 'A(EXP)sf'; Outlook Stable;
AUD10m Class D notes: BBB(EXP)sf'; Outlook Stable;
AUD5.7m Class E notes: BB(EXP)sf'; Outlook Stable; and
AUD14.25m Class F notes: NRsf
The notes will be issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2015-2.
At the cut-off date, the total collateral pool consisted of 142,188 individual consumer loan contracts totalling AUD280.9m. The loan receivables are retail point-of-sale interest-free consumer finance receivables that finance a wide variety of products including solar equipment (43.1%); jewellery (17.9%); fitness equipment (4%); and a broad cross section of other products. Transactions issued by Certegy have portfolios that have a remaining term that is shorter than typical Australian ABS transactions; therefore we have amended back-loaded loss timing to ensure the pool, towards the tail, is at least larger than the balance of expected losses that are realised within our cashflow analysis.
KEY RATING DRIVERS
Experienced Originator: Certegy is a wholly owned subsidiary of FlexiGroup Limited (FlexiGroup), a provider of retail point-of-sale consumer finance. Certegy provides "no interest ever" consumer loans, an interest-free product, and cheque guarantee products in Australia. Certegy delivers its products through a varied network of retailers and service providers.
Diverse and Granular Portfolio: The portfolio comprises of receivables originated to a geographically diversified pool of Australian retail customers across many asset types. The average contract size is AUD1,976 while the weighted average (WA) remaining term stands at 22.5 months. The pool contains 54.2% homeowners and 30% repeat customers.
Strong Track Record: Delinquencies greater than 30 days on Certegy's retail portfolio have historically tracked below 3.0%.
Availability of Excess Spread: The transaction yields significant levels of excess spread which is used to support the rating of the Class D and E notes, while sufficient credit enhancement, provided by the subordination of more junior notes, exists for the Class A1, A2, B and C notes, to be rated independent of any soft credit support (excess spread).
Support Features Support Rating: A liquidity reserve, funded by proceeds from issuance, will ensure stable cash flows for all rated notes and trust expenses. A derivative reserve account will be established to set aside any voluntary prepayments made by borrowers, to ensure sufficient income is available to cover future swap payments.
No Residual Value Risk: All securitised loans are structured so that there is no exposure to residual value risk, with the borrower liable for such risks at all times.
EXPECTED RATING SENSITIVITIES
In Fitch's analysis, all rated classes of notes could withstand more than a 50% increase in the base case default level for each notes' relevant rating stress. Under Fitch's 'AAA' stress, the Class A notes can withstand more than 6.0x the expected base case loss than is currently experienced. The Class B, C, D and E notes could withstand respectively, 4.8x, 3.6x, 2.6x and 1.8x, the expected base case loss than is currently experienced.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch conducted a file review of 12 sample loan files focusing on the underwriting procedures conducted by Certegy compared to Certegy's credit policy at the time of underwriting. No material discrepancies were noted in the underwriting practices of Certegy. The file review also checked the accuracy of the data file provided to Fitch for its rating analysis. The file review reported no material errors that would impact Fitch's rating analysis.
Key Rating Drivers and Expected Rating Sensitivities are further discussed in the corresponding presale report entitled "Flexi ABS Trust 2015-2", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.
AUD100m Class A1 notes: 'F1+(EXP)sf';
AUD125.1m Class A2 notes: 'AAA(EXP)sf'; Outlook Stable;
AUD17.1m Class B notes: 'AA(EXP)sf'; Outlook Stable;
AUD12.85m Class C notes: 'A(EXP)sf'; Outlook Stable;
AUD10m Class D notes: BBB(EXP)sf'; Outlook Stable;
AUD5.7m Class E notes: BB(EXP)sf'; Outlook Stable; and
AUD14.25m Class F notes: NRsf
The notes will be issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2015-2.
At the cut-off date, the total collateral pool consisted of 142,188 individual consumer loan contracts totalling AUD280.9m. The loan receivables are retail point-of-sale interest-free consumer finance receivables that finance a wide variety of products including solar equipment (43.1%); jewellery (17.9%); fitness equipment (4%); and a broad cross section of other products. Transactions issued by Certegy have portfolios that have a remaining term that is shorter than typical Australian ABS transactions; therefore we have amended back-loaded loss timing to ensure the pool, towards the tail, is at least larger than the balance of expected losses that are realised within our cashflow analysis.
KEY RATING DRIVERS
Experienced Originator: Certegy is a wholly owned subsidiary of FlexiGroup Limited (FlexiGroup), a provider of retail point-of-sale consumer finance. Certegy provides "no interest ever" consumer loans, an interest-free product, and cheque guarantee products in Australia. Certegy delivers its products through a varied network of retailers and service providers.
Diverse and Granular Portfolio: The portfolio comprises of receivables originated to a geographically diversified pool of Australian retail customers across many asset types. The average contract size is AUD1,976 while the weighted average (WA) remaining term stands at 22.5 months. The pool contains 54.2% homeowners and 30% repeat customers.
Strong Track Record: Delinquencies greater than 30 days on Certegy's retail portfolio have historically tracked below 3.0%.
Availability of Excess Spread: The transaction yields significant levels of excess spread which is used to support the rating of the Class D and E notes, while sufficient credit enhancement, provided by the subordination of more junior notes, exists for the Class A1, A2, B and C notes, to be rated independent of any soft credit support (excess spread).
Support Features Support Rating: A liquidity reserve, funded by proceeds from issuance, will ensure stable cash flows for all rated notes and trust expenses. A derivative reserve account will be established to set aside any voluntary prepayments made by borrowers, to ensure sufficient income is available to cover future swap payments.
No Residual Value Risk: All securitised loans are structured so that there is no exposure to residual value risk, with the borrower liable for such risks at all times.
EXPECTED RATING SENSITIVITIES
In Fitch's analysis, all rated classes of notes could withstand more than a 50% increase in the base case default level for each notes' relevant rating stress. Under Fitch's 'AAA' stress, the Class A notes can withstand more than 6.0x the expected base case loss than is currently experienced. The Class B, C, D and E notes could withstand respectively, 4.8x, 3.6x, 2.6x and 1.8x, the expected base case loss than is currently experienced.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch conducted a file review of 12 sample loan files focusing on the underwriting procedures conducted by Certegy compared to Certegy's credit policy at the time of underwriting. No material discrepancies were noted in the underwriting practices of Certegy. The file review also checked the accuracy of the data file provided to Fitch for its rating analysis. The file review reported no material errors that would impact Fitch's rating analysis.
Key Rating Drivers and Expected Rating Sensitivities are further discussed in the corresponding presale report entitled "Flexi ABS Trust 2015-2", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.
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