OREANDA-NEWS. Fitch Ratings has assigned ratings to Australian Sales Finance and Credit Cards Trust's floating debt, backed by Australian consumer receivables. The receivables are originated by Latitude Finance Australia - the renamed GE Consumer Finance business that has been acquired by a consortium comprising KKR, Varde Partners and Deutsche Bank AG (KVD). The ratings are as follows:

AUD3,100.0m Class A debt: 'Asf'; Outlook Stable;
AUD157.5m Class B debt: 'BBBsf'; Outlook Stable;
AUD241.7m Class C debt: 'BBsf'; Outlook Stable; and
AUD264.9m Class D debt: not rated.

The classes of debt are issued by Perpetual Corporate Trust Limited in its capacity as trustee of the Australian Sales Finance and Credit Cards Trust.

The transaction established a revolving, asset backed debt programme that features a multi class structure that will purchase receivables from the seller on a revolving basis. If the revolving period is not extended or the debt not otherwise voluntarily repaid in full at the end of the revolving period, that series will enter a controlled amortisation period, during which one twenty fourth of the face value of that series will be repaid on each payment date following the end of the revolving period.

To protect the debt holders from deterioration in the credit quality of the portfolio, the transaction features performance triggers that either require rectification or may cause a rapid amortisation event in which all collections will be used to pay down the debt in sequential order.

At the cut-off date, the collateral pool consisted of approximately AUD3.3 billion of consumer receivables, comprising 1.8 million active accounts with an average balance outstanding of approximately AUD1,800. The receivables were originated by GE's Australian consumer finance business which has now been sold to KVD. The revolving receivables pool is subject to eligibility criteria and portfolio parameters.

KEY RATING DRIVERS
Base Case Reflects Performance: Fitch has analysed the originator's historical performance for key portfolio metrics, yield, charge-offs and monthly payment rates. Base cases have been set for each of these metrics to permit analysis of the overall receivables portfolio.

Sufficient Credit Enhancement: All classes of debt benefit from sufficient subordination and a liquidity facility provided by National Australia Bank Limited.

Performance Triggers Provide Protection: The transaction benefits from several performance triggers that, if breached can potentially lead to rapid amortisation of the transaction to prevent exposure to further deterioration in asset performance.

Tax Neutrality: This trust, unlike other Australian securitisation trusts, is not tax neutral due to withholding tax on distribution to offshore unitholders. The overall amount of tax is relatively small and structural features help to mitigate this risk.

Originator and Servicer: While the business has experienced a change of ownership the existing operational management and staff have been managing the consumer receivables for over a decade. Fitch conducted a review of the underwriting and servicing capabilities in May 2015 and found their capabilities satisfactory.

RATING SENSITIVITIES
Fitch has modelled three different scenarios when evaluating the rating sensitivity compared to the expected performance for the trust: 1) increased charge-offs; 2) a reduction in the yield, and 3) a reduction in the monthly payment rate.

The rating sensitivity indicates sensitivity to an increase in defaults and a reduction in monthly payment rates, with less sensitivity to yield reduction. The Class C debt is significantly more sensitive to changes in performance than other classes of debt.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch reviewed the results of the agreed-upon procedures (AUP) conducted on the portfolio. The AUP reported no material errors that would impact Fitch's rating analysis.