OREANDA-NEWS. Fitch Ratings has downgraded two notes and affirmed one issued under Interstar Millennium Series 2005-3E Trust. All have been removed from Rating Watch Negative (RWN), where they were placed on 19 June 2015 following the downgrade of The Royal Bank of Scotland plc (RBS, BBB+/Stable/F2) on 19 May 2015. RBS is a currency swap provider for the transaction, which is a securitisation of Australian conforming residential mortgages originated through a network of mortgage originators and brokers under the Interstar Millennium Trust Securitisation programmes.

The rating actions are as listed below:

GBP39.8m notes Class A2 (ISIN XS0232803709) downgraded to 'Asf' from 'AAAsf'; off RWN; Outlook Stable;
AUD37.0m notes Class AB (ISIN AU300INTD010) downgraded to 'Asf' from 'AAAsf'; off RWN; Outlook Stable; and
AUD44.5m notes Class B (ISIN AU300INTD028) affirmed at 'Bsf'; off RWN; Outlook Stable.

KEY RATING DRIVERS
RBS has been collateralising in accordance with the transaction documents, which reflected Fitch's counterparty criteria at the time of the transaction's closing. Fitch always applies its current criteria in assessing transactions.

Discussions between RBS and the trust manager in relation to collateralising in accordance with Fitch's current counterparty criteria have, however, resulted in the decision to take no further action, so the current documentation remains.

Fitch has assessed that the gap in collateralisation between the two criteria is materially significant and will cap the ratings of the notes at 'Asf', in accordance with the minimum derivative counterparty ratings under Fitch's current criteria. Credit has been given to RBS as a 'BBB+' rated entity.

The affirmation of the Class B notes reflects the credit given to RBS as a currency swap provider and the fact that the current rating of Class B notes is lower than the rating of RBS.

RATING SENSITIVITIES
Any change in the rating of RBS is expected to impact the rating of the Class A2 and AB notes, as the creditworthiness of RBS is a key hedge of currency risk in the transaction.

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 10 sample loan files focusing on the underwriting procedures conducted by Advantedge compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.