OREANDA-NEWS. Fitch Ratings has assigned Nordax Sverige 4 AB's (publ) (Scandinavian Consumer Loans V, SCL V, or SPV) notes backed by Swedish unsecured consumer loan receivables expected ratings as follows:

Class A notes, due December 2038: 'AAA(EXP)sf'; Outlook Stable
Class B notes, due December 2038: 'AA(EXP)sf'; Outlook Stable
Class C notes, due December 2038: 'A(EXP)sf'; Outlook Stable
Class D notes, due December 2038: 'BBB+(EXP)sf'; Outlook Stable
Class E notes, due December 2038: Not rated

This transaction is a securitisation of a revolving pool of unsecured consumer loans (the collateral) originated to borrowers in Sweden by Nordax Bank AB (publ) (Nordax, also seller and servicer). SCL V is incorporated in Sweden as a special purpose vehicle with limited liability and is wholly owned by Nordax.

Final ratings are contingent upon the receipt of final documents and legal opinions conforming to the information already received.

The expected ratings are based on Fitch's assessment of Nordax's origination and servicing procedures, Fitch's expectations of future asset performance, the available credit enhancement, and the transaction's legal structure.

KEY RATING DRIVERS
High-risk Asset Characteristics
Fitch determined a default base case of 11.5%, in line with that set for the Scandinavian Consumer Loans III (SCL III) transaction. This is despite the inclusion of broker-led loans (about 30% in SCL V compared with none in SCL III at closing) and the current underwriting criteria which allow longer terms and larger amounts for loans originated to low-risk customers.

This base case rate factors in Nordax' scrutiny of brokers, broker regulation in Sweden and adjustments made to the bank's scorecard and the cut-off scores since 2012, which have resulted in better underwriting quality. Broker-led loans have been performing in line with the direct mail originations since implementation of a new scorecard in August 2012.

The servicer has strong recovery procedures in place, aided by the Swedish lender-friendly legal framework, which allows seizure of salary and strict debtor incentives. That has resulted in strong recovery performance, as reflected in our recovery base case of 60%.

Revolving Transaction
The two-year revolving period exposes noteholders to additional risks with respect to a longer risk horizon, the portfolio's asset quality and performance. Replenishment and certain performance triggers will end the revolving period if breached. This limits any potential deterioration due to evolving portfolio composition. Fitch has used the default multiple to include an element of stress to mitigate any potential risk caused by the revolving period.

Non-orphaned SPV
The issuer's full ownership by Nordax is unusual compared with securitisation structures in most other European jurisdictions; however, Fitch has received a legal opinion confirming that an insolvency of Nordax will not cause the SPV to be consolidated or forced into insolvency. This opinion is reinforced by the successful track record of this type of SPV structure in previous Swedish securitisations.

RATING SENSITIVITIES
Expected impact on the note rating of increased defaults (class A/class B/class C/class D):
Current ratings: 'AAAsf'/'AAsf'/'Asf'/'BBB+sf'
Increase base case defaults by 10%: 'AA+sf'/'AA-sf'/'Asf'/'BBBsf'
Increase base case defaults by 25%: 'AAsf'/'A+sf'/A-sf'/'BBB-sf'
Increase base case defaults by 50%: 'A+sf'/'Asf'/'BBBsf'/'BB+sf'

Expected impact on the note rating of reduced recoveries (class A/class B/class C/class D):
Current ratings: 'AAAsf'/'AAsf'/'Asf'/'BBB+sf'
Reduce base case recovery by 10%: 'AA+sf'/'AAsf'/'Asf'/'BBB+sf'
Reduce base case recovery by 25%: 'AA+sf'/'AA-sf'/'Asf'/'BBBsf'
Reduce base case recovery by 50%: 'AA+sf'/'AA-sf'/'BBB+sf'/'BBB-sf'

Expected impact on the note rating of increased defaults and reduced recoveries (class A/class B/class C/class D):
Current ratings: 'AAAsf'/'AAsf'/'Asf'/'BBB+sf'
Increase default base case and market value stress by 10%; reduce recovery base case by 10%: 'AA+sf'/'AA-sf'/'A-sf'/'BBBsf'
Increase default base case and market value stress by 25%; reduce recovery base case by 25%: 'AAsf'/'Asf'/'BBB+sf'/'BB+sf'
Increase default base case and market value stress by 50%; reduce recovery base case by 50%: 'A+sf'/'BBB+sf'/'BB+sf'/'B+sf'

DUE DILIGENCE USAGE
Fitch was provided with a third party asset portfolio assessment in relation to this rating action.

DATA ADEQUACY
Fitch reviewed the results of the third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis. Fitch believes the sample size and relevance of the tested fields suggest the data provided by the originator for assigning the ratings was of acceptable quality.

Fitch conducted a review of a small targeted sample of Nordax'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.

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.