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Fitch Assigns Final Ratings to APOLLO Series 2017-2 Trust
September 28, 2017 / 3:26 AM / 19 days ago

Fitch Assigns Final Ratings to APOLLO Series 2017-2 Trust

(The following statement was released by the rating agency) SYDNEY, September 27 (Fitch) Fitch Ratings has assigned final ratings to APOLLO Series 2017-2 Trust's mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential, full documentation mortgage loans originated by Suncorp-Metway Limited (SML, A+/Stable/F1). The ratings are as follows: AUD1,380.00 million Class A1 notes: 'AAAsf'; Outlook Stable AUD30.00 million Class A2 notes: 'AAAsf'; Outlook Stable AUD32.25 million Class AB notes: 'AAAsf'; Outlook Stable AUD22.50 million Class B notes: 'NRsf' AUD17.25 million Class C notes: 'NRsf' AUD8.25 million Class D notes: 'NRsf' AUD9.75 million Class E notes: 'NRsf' The notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of APOLLO Series 2017-2 Trust. The total collateral pool consisted of 5,654 obligors, totalling AUD1.5 billion at the 21 September 2017 cut-off date. The pool stratifications of the closing pool are comparable with the AUD750 million launch pool. KEY RATING DRIVERS Sufficient Credit Support: The class A1, A2 and AB notes benefit from credit enhancement (CE) of 8.0%, 6.0% and 3.9% respectively, provided by the subordinated notes. The CE is independent of any credit provided by lenders' mortgage insurance (LMI). Pool Characteristics: The portfolio has weighted-average (WA) seasoning of 38 months, with a WA unindexed loan/value ratio (LVR) of 61.7% and WA indexed LVR of 58.4%. The average obligor current loan size is AUD265,299. Investment loans represent 28.2% of the pool by balance and interest-only loans represent 15.5%. Sequential/Pro Rata Paydown: All classes will receive principal sequentially prior to the pro rata test conditions being met, with class A1 and A2 being paid pari passu. Once met, principal will be allocated on a pro rata basis across all notes. Multiple Liquidity Sources: Liquidity support will be provided via excess income; an excess revenue reserve that traps excess income up to a target of 0.2% of the note balance at closing, subject to various triggers being met; principal draws; and a liquidity facility sized at 1.0% of the aggregate performing loan balance, with a facility floor of 0.1% of the aggregate loan balance at closing. Liquidity will be available to all notes; however, charge-off triggers apply to the class B, C, D and E notes, with the class E notes subject to additional performance triggers. FINAL RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis of the ratings by stressing the transaction's initial base-case assumptions. Analysis of the foreclosure scenarios found that the class A1, A2 and AB notes' final ratings were not affected under Fitch's moderate or severe foreclosure stress (15% and 30% increase) scenarios. The analysis of the recovery scenarios found that the class A1 and A2 notes' final ratings were not affected under Fitch's moderate or severe (15% and 30% decrease) scenarios, and the AB notes' final rating decreased to 'AA+sf' under the severe scenario. The analysis of Fitch's moderate combination stress of 15% increase in foreclosures and 15% decrease in recoveries found that the final ratings of the class A1 and A2 notes were unaffected, and the AB notes' final rating decreased by one notch. The class A1 and A2 notes' final ratings were decreased to 'AA+sf' under Fitch's severe combination stress of 30% increase in foreclosures and 30% decrease in recoveries while the class AB notes' final ratings decreased to 'AA-sf'. The analysis of the ratings to deterioration in the recovery rate found that the final ratings on the class A1, A2 and AB notes will decrease to 'AA+sf' if the recovery rate decreases by 50%, 50% and 25% respectively. The class A1, A2 and AB notes will not decrease below investment grade even with a recovery rate of 0%. The transaction structure supports an LMI-independent rating for the class A1, A2 and AB notes; therefore, LMI is not required to support the rating due to the level of credit support provided by the lower notes. The class AB notes' LMI-independent rating also relies upon excess spread. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016. DATA ADEQUACY Prior to the transaction closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was available for this transaction. As part of its on-going monitoring, Fitch conducted a review of a small targeted sample of SML'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. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by SML as at 20 September 2017 Transaction documentation provided by King & Wood Mallesons, the issuer's counsel. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst Chris Stankovski Director +612 8256 0341 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney, NSW 2000 Secondary Analyst James Leung Director +612 8256 0322 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria APAC Residential Mortgage Rating Criteria (pub. 14 Jul 2017) here Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 17 Feb 2017) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here RMBS Lenders’ Mortgage Insurance Rating Criteria (pub. 09 Jun 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 23 May 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Related Research APOLLO Series 2017-2 Trust - Appendix here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy 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 PUBLIC 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes 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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