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Fitch Assigns Final Ratings to Series 2014-1 REDS EHP Trust
September 18, 2014 / 5:47 AM / 3 years ago

Fitch Assigns Final Ratings to Series 2014-1 REDS EHP Trust

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Series 2014-1 REDS EHP Trust here SYDNEY, September 18 (Fitch) Fitch Ratings has assigned Series 2014-1 REDS EHP Trust final ratings and Outlooks. The transaction is an asset-backed securitisation of automotive and equipment loan receivables. The ratings are as follows: AUD760m Class A notes: 'AAAsf'; Outlook Stable AUD41.8m Class B notes: 'AAsf'; Outlook Stable AUD49.4m Class C notes: 'Asf'; Outlook Stable AUD22.8m Class D notes: 'BBBsf'; Outlook Stable AUD23.75m Class E notes: 'BBsf'; Outlook Stable AUD52.25m seller notes: not rated The notes, due July 2020, have been issued by Perpetual Trustee Company Limited as trustee of Series 2014-1 REDS EHP Trust. The Series 2014-1 REDS EHP Trust is a legally distinct trust established pursuant to a master trust and security trust deed. At the cut-off date, the total collateral pool consisted of 14,765 loan receivables totalling approximately AUD938.1m, with an average size of AUD63,537. The pool comprises loan receivables originated by BOQEF whose ultimate parent is Bank of Queensland. All are amortising principal and interest loans for cars and light commercial vehicles (27.3%), trucks and buses (25.9%), excavators (11.6%), trailers (11.2%) and other wheels (24%). The pool contains loans with varying balloon amounts payable at maturity (36.7%), with a weighted average balloon payment of 12.1%. The transaction also benefits from a large and diverse number of small business borrowers across a broad range of industries. KEY RATING DRIVERS Experienced Originator: BOQEF is an established originator in the market that has been providing auto and equipment financing since 1971. BOQEF maintains a well-balanced and experienced team within its underwriting division, while origination is bound by a credit policy framework that includes, but is not limited to, credit risk acceptance criteria and delegations. Diverse and Granular Portfolio: The portfolio is granular with a diverse mix of new and used cars, light commercial vehicles, trucks, buses, trailers, excavators, and other equipment. The assets are spread across a wide range of industries. There is a diversified distribution of balloon maturity dates, while weighted average (WA) seasoning is currently at 14 months. Strong Track Record: Records since 1995 show consistent performance. BOQEF is a regular participant in securitisation, with eight series of notes issued in the REDS EHP programme since 2003. Multiple Levels of Liquidity: Multiple sources of liquidity support ensure stable cash flows for all notes and trust expenses. Hedging arrangements are in place to address fixed-to-floating rate mismatches between the fixed rate earned on the assets and floating rate liability payments. No Residual Value Risk: All securitised loans are structured so that there is no exposure to residual value risk, with the borrower liable for such risks at all times. RATING SENSITIVITY Increases in the frequency of defaults could produce loss levels higher than Fitch's base case, which could result in negative rating actions on the notes. Fitch evaluated the sensitivity of the ratings of Series 2014-1 REDS EHP Trust to increased defaults, reduced recoveries and a combination of these over the life of the transaction. Its analysis found that collectively the ratings of all classes were susceptible under all of Fitch's default stresses, with the exception of the class E notes that remained stable under a mild stress of 10%. All classes remained stable under a mild recovery stress of 10%, except for the class B and C notes. Under a moderate recovery stress of 25% the class B, C and D notes were impacted, while all classes of notes were negatively impacted by stressing recoveries by 50%. All classes, except the class E notes, were impacted by a combination of increased defaults and reduced recoveries of 10%, while all classes were impacted by increases in defaults and a reduction in recoveries by at least 25% and 50% respectively. Fitch's stress and rating sensitivity analysis is discussed in the corresponding new issue report entitled "Series 2014-1 REDS EHP Trust", published today, available on or by clicking on the above link. Included in a corresponding appendix is a description of the representations, warranties and enforcement mechanisms. Contacts: Primary Analyst Spencer Wilson Associate Director +61 2 8256 0320 Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Ben Newey Director +61 2 8256 0341 Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 The source of information used to assess these ratings was Macquarie Bank Limited, and BOQ Equipment Finance Limited and their legal counsel, Allen & Overy. The issuer has informed Fitch that all relevant information about the rated notes remains public. Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0326, Email: Additional information is available at Applicable criteria, "Global Structured Finance Rating Criteria", dated 4 Aug 2014; "APAC Consumer ABS Rating Criteria", dated 24 July 2014; "Criteria for Rating Granular Corporate Balance-Sheet Securitisations (SME CLOs)" dated 5 March 2014; "Counterparty Criteria for Structured Finance and Covered Bonds", dated 14 May 2014; and "Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum", dated 14 May 2014;, are all available at Applicable Criteria and Related Research: Global Structured Finance Rating Criteria here APAC Consumer ABS Rating Criteria here Criteria for Rating Granular Corporate Balance-Sheet Securitisations (SME CLOs) here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum 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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