March 13, 2017 / 6:22 AM / 8 months ago

Fitch Assigns Ratings to APOLLO Series 2017-1 Trust

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: APOLLO Series 2017-1 Trust here SYDNEY, March 13 (Fitch) Fitch Ratings has assigned final ratings to APOLLO Series 2017-1 Trust's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking prime Australian mortgages originated by Suncorp-Metway Limited (Suncorp, A+/Stable/F1). The ratings are as follows: AUD1,150m Class A notes: 'AAAsf'; Outlook Stable; AUD48.13m Class AB notes: 'AAAsf'; Outlook Stable; AUD21.25m Class B notes: 'NRsf'; AUD15.63m Class C notes: 'NRsf'; AUD6.88m Class D notes: 'NRsf'; and AUD8.13m Class E notes: 'NRsf'. The notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of APOLLO Series 2017-1 Trust. At the cut-off date of 28 February 2017, the total collateral pool, with a balance of AUD1,250m, consisted of 4,550 loans with an average borrower balance of AUD274,725. Loans with loan-to-value ratios (LVR) exceeding 80% make up 15.7% of the portfolio, while interest-only loans make up 15.4%. KEY RATING DRIVERS Sufficient Credit Support: The class A notes have sufficient credit enhancement of 8% provided by the class AB, B, C, D and E notes, which is independent of any credit provided by lenders' mortgage insurance (LMI). The rating of the class AB notes relies upon credit support of 4.15% provided by the subordinated classes and LMI. Conservative Pool Characteristics: The portfolio has significant weighted-average (WA) seasoning of 45 months, with a WA LVR of 64.7%. Each loan in the portfolio comprises of full-documentation mortgages, and investment loans represent 27.5% of the pool by balance under Fitch's methodology of treating loans collateralised by multiple properties as investment loans. The pool's geographic distribution is representative of Suncorp's customer base. Dynamic Liquidity Support Mechanism: Principal draws and a liquidity facility, which is initially equivalent to 1.3% of the aggregate outstanding balance of all performing loans, provide cover for liquidity shortfalls of all note classes. Liquidity support will not be available to class B, C, D and E notes if unreimbursed charge-offs relating to that note class exist. Additional triggers of average 60+ day arrears not less than 4% and the payment date being prior to the call date apply to the unrated class E notes. Pro Rata Mechanism: Principal will be allocated pro rata to all note classes once credit support to the class A and AB notes doubles and there are no unreimbursed charge-offs outstanding, among other triggers being met. RATING SENSITIVITIES Unexpected decreases in the value of residential property or increases in the frequency of foreclosures and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base case, possibly resulting in negative rating action on the notes. Fitch has evaluated the sensitivity of the ratings to increased defaults and reduced recovery rates over the life of the transaction. Its analysis found the class A and AB notes' ratings remained stable under both of Fitch's moderate and severe default (15% and 30% increase) and moderate and severe recovery rate (15% and 30% decrease) stress scenarios. The rating of the class A notes remained stable under a combination stress of a 15% increase in defaults and a 15% decrease in recoveries, and 30% increase in defaults and a 30% decrease in recoveries. The rating of the class AB notes remained stable under a combination stress of a 15% increase in defaults and a 15% decrease in recoveries, but deteriorated to 'AAsf' under a more severe combination stress of a 30% increase in defaults and 30% decrease in recoveries. The ratings on the class A and AB notes are independent of LMI. 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 ongoing monitoring, Fitch conducted a review of a small targeted sample of Suncorp'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. Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "APOLLO Series 2017-1 Trust", published today. SOURCES OF INFORMATION The information below was used in the analysis: -Loan-by-loan data provided by Suncorp as at 28 February 2017 -Transaction documentation provided by King & Wood Mallesons, the issuer's counsel. -Mortgage book arrears provided by Suncorp as at 19 January 2017. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. RESI INVESTOR This transaction is included in Fitch's Resi Investor tool ( Resi Investor allows users to conduct their own scenario analysis. The tool allows investors to vary Fitch's rating assumptions to calculate their own expected losses and model-implied rating outcomes. It also allows investors to generate pivot table-type stratification tables, interactive charts and transaction comparisons. Contacts: Primary Analyst Spencer Wilson Associate Director +612 8256 0320 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney, NSW 2000 Secondary Analyst James Leung Director +612 8256 0322 Committee Chairperson Atsushi Kuroda Senior Director +813 3288 2692 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria APAC Residential Mortgage Criteria (pub. 30 Aug 2016) here Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016) here Global Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 28 Jul 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Related Research APOLLO Series 2017-1 Trust - Appendix here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020448 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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