January 22, 2015 / 1:41 AM / 3 years ago

Fitch Affirms Ratings of 5 APOLLO RMBS Transactions

(The following statement was released by the rating agency) SYDNEY, January 21 (Fitch) Fitch Ratings has affirmed the ratings of 11 tranches from five APOLLO Series residential mortgage backed securities (RMBS) transactions. The transactions are securitisations of first-ranking Australian residential mortgages originated by Suncorp-Metway Limited (A+/Stable/F1). A list of rating actions can be found at the end of this commentary. KEY RATING DRIVERS The affirmations reflect Fitch's view that available credit enhancement is sufficient to support the notes' current ratings, and the agency's expectations of Australia's economic conditions. The credit quality and performance of the loans in the collateral pools have remained in line with Fitch's expectations. As at December 2014, 30+ days arrears for Apollo 2007-1E and Apollo 2009-1 were at 2.07% and 1.15% respectively, above Fitch's Dinkum Index, which measures industry-wide performance (3Q14: 1.08%). The remaining transactions' 30+ days arrears were below the Index. Eight loans had resulted in losses totalling AUD745,253, seven of which were in the portfolio backing Apollo 2007 1E, with the remaining loss in Apollo 2012-1 being the only new loss recorded across the transactions since the last rating action in February 2014. Losses on the underlying mortgages in the pool have been covered primarily by the lenders' mortgage insurance (LMI) provider QBE Lenders Mortgage Insurance Pty Limited (QBE, Insurer Financial Strength Rating: AA-/Stable); the overall payout ratio has been 91.6%. The remaining losses were covered by excess spread. All loans in each of the underlying portfolios are covered by LMI from QBE. The portfolios were well seasoned at between 4.5 and 9.7 years, and the Fitch-calculated weighted average indexed loan-to-value (LVR) ranged between 48.6% (for Apollo 2007-1E) and 60.4% (Apollo 2013-1), compared to 54.2%-62.9% before indexation. Each pool is geographically concentrated in Queensland and Fitch has taken this into account in its analysis. RATING SENSITIVITIES Sequential pay-down has increased credit enhancement for the senior notes of each transaction, with the AAAsf rated notes able to withstand many multiples of the latest reported arrears. The AAAsf modelled loss severities after LMI ranged between 20.7% and 22.7% across the transactions. At their respective loss severities, the Class AB notes could withstand default rates of 21.8% (Apollo 2011-1) and 17.6% (Apollo 2012-1). The senior notes of each transaction could withstand higher default rates of between 26.5% (Apollo 2007-1E) and 100% (Apollo 2009-1). This analysis excludes credit to excess spread, which has been strong and stable in each of the transactions. The ratings of all the APOLLO RMBS transactions' senior notes are independent of downgrades to the LMI provider's ratings. The Class B notes' ratings are unlikely to change unless there is a significant reduction in LMI claims paid and Fitch considers that levels of excess spread are no longer adequate. The rating actions are as follows: APOLLO Series 2007-1E (APOLLO 2007-1E): AUD144.8m Class 1A (ISIN AU0000AOYHA7) affirmed at 'AAAsf'; Outlook Stable; EUR107.7m Class 2A (ISIN XS0299266972) affirmed at 'AAAsf'; Outlook Stable; and AUD20.1m Class B (ISIN AU3FN0002580) affirmed at 'BBsf'; Outlook Stable. APOLLO Series 2009-1 (APOLLO 2009-1): AUD255.1m Class A3 (ISIN AU3FN0008697) affirmed at 'AAAsf'; Outlook Stable; and AUD147.8m Class B (ISIN AU3FN0008975) affirmed at 'BBsf'; Outlook Stable. APOLLO Series 2011-1 (APOLLO 2011-1): AUD248.2m Class A1 (ISIN AU3FN0014502) affirmed at 'AAAsf'; Outlook Stable; AUD227.9m Class A2 (ISIN AU3FN0014510) affirmed at 'AAAsf'; Outlook Stable; and AUD59.3m Class AB (ISIN AU3FN0014528) affirmed at 'AAAsf'; Outlook Stable. APOLLO Series 2012-1 (APOLLO 2012-1): AUD474.1m Class A1 (ISIN AU3FN0016515) affirmed at 'AAAsf'; Outlook Stable; and AUD52.0m Class AB (ISIN AU3FN0016523) affirmed at 'AAAsf'; Outlook Stable. APOLLO Series 2013-1 (APOLLO 2013-1): AUD671.7m Class A (ISIN AU0000AORHA1) affirmed at 'AAAsf'; Outlook Stable. Fitch's initial key rating drivers and rating sensitivities are further discussed within each transaction's new issue report, with the exception of the new issue reports for APOLLO 2007-1E and 2009-1, which do not include rating sensitivities. All reports are available at www.fitchratings.com. A comparison of the transactions' representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below. Contacts: Lead Surveillance Analyst Brenden Asplin Analyst +61 2 8256 0340 Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000 Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 The source of information used to assess these ratings was the servicer Suncorp-Metway Limited. 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; "Global Criteria for Lenders' Mortgage Insurance in RMBS" dated 23 June 2014; "APAC Residential Mortgage Criteria", dated 23 June 2014; and "APAC Residential Mortgage Criteria Addendum - Australia", dated 23 June 2014, are available at www.fitchratings.com. Related Research: "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 31 October 2014; "Apollo Series 2011-1 Trust Appendix", dated 7 December 2011; "Apollo Series 2012-1 Trust Appendix", dated 11 September 2012; and "Apollo Series 2013-1 Trust - New Issue Appendix", dated 23 May 2013. Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: iselle.gonzalez@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable Criteria and Related Research: Global Structured Finance Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here Global Criteria for Lenders' Mortgage Insurance in RMBS here APAC Residential Mortgage Criteria here APAC Residential Mortgage Criteria Addendum – Australia - Amended here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Apollo Series 2011-1 Trust Appendix here Apollo Series 2012-1 Trust - Appendix here Apollo Series 2013-1 Trust - New Issue Appendix here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

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