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Fitch Assigns Expected Ratings to Flexi ABS Trust 2017-1
February 13, 2017 / 3:58 AM / 9 months ago

Fitch Assigns Expected Ratings to Flexi ABS Trust 2017-1

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Flexi ABS Trust 2017-1 here SYDNEY, February 12 (Fitch) Fitch Ratings has assigned expected ratings to Flexi ABS Trust 2017-1's asset-backed floating-rate notes. The issuance consists of notes backed by small-balance unsecured consumer loans originated by Certegy Ezi-Pay Pty Ltd (Certegy) whose ultimate parent is FlexiGroup Limited (FlexiGroup). The ratings are as follows: AUD92m class A1 notes: 'F1+(EXP)sf'; AUD63.4m class A2 notes: 'AAA(EXP)sf'; Outlook Stable; AUD50m class A2-G notes: 'AAA(EXP)sf'; Outlook Stable; AUD13.5m class B notes: 'AA(EXP)sf'; Outlook Stable; AUD15.6m class C notes: 'A(EXP)sf'; Outlook Stable; AUD10.6m class D notes: 'BBB+(EXP)sf'; Outlook Stable; AUD6.6m class E notes: 'BBB-(EXP)sf'; Outlook Stable; and AUD13.3m class F notes: 'NR(EXP)sf'. The notes will be issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2017-1. At the cut-off date at 6 February 2017, the total collateral pool consisted of 128,002 individual consumer loan contracts totalling AUD261.2m. The receivables are retail point-of-sale interest-free consumer-finance loans used to finance a wide variety of products. These include solar equipment (38.7%); jewellery (19.7%); roofing, shutters and guttering (6.1%); and other homeowner products. Homeowner industries make up 52% of borrowers, and 40.9% are repeat Certegy customers. KEY RATING DRIVERS Availability of Excess Spread: The collateral pools' weighted-average (WA) implied interest rate is 17.8%; and as such the transaction yields significant levels of excess spread, which is used to support the rated classes. Experienced Originator: Certegy is a wholly owned subsidiary of FlexiGroup Limited (FlexiGroup), a provider of retail point-of-sale consumer finance. Certegy provides "no interest ever" consumer loans, a no interest product, and cheque-guarantee products in Australia. Certegy delivers its products through a network of retailers and service providers. Delinquencies greater than 30 days on Certegy's retail portfolio have historically tracked below 3.0%. Diverse and Granular Portfolio: The portfolio consists of receivables originated to a geographically diversified pool of Australian retail customers across many asset types. The average contract size is AUD2,041, while the WA remaining term stands at 24.4 months. Homeowners make up 52% of borrowers, of which 38.7% relates to solar products, and 40.9% are repeat Certegy customers. Support Features: A liquidity reserve, funded by proceeds from issuance, will ensure stable cash flows for all rated notes and trust expenses. A derivative reserve account will be established to set aside voluntary prepayments made by borrowers to ensure sufficient income is available to cover future swap payments. No Residual Value Risk: All securitised loans are structured so there is no exposure to residual value risk, with the borrower liable for such risks at all times. EXPECTED 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 expected ratings to increased defaults, and reduced recovery rates over the life of the transaction The agency's analysis found that the expected ratings assigned to the class A2 and A2-G (the A2 notes), B, C and D notes were sensitive to Fitch's mild (10% increase) default stress where the ratings on these notes declined by one notch from the expected ratings assigned to each of these classes. Under Fitch's medium (25% increase) default stress, the ratings on the class A2, B, C and D notes declined by two notches from the expected rating assigned to each of these classes. The class E notes under a medium (25% increase) default stress deteriorated by one notch to 'BB+sf'. Under Fitch's more severe default stress scenario, in which the base case defaults increased by 50%, the ratings on the class A2 deteriorated further to 'A+sf', while the ratings of the class B, C, D and E notes' declined to 'A-sf', 'BBBsf', 'BB+sf' and 'BB-sf', respectively. The class A1 notes were not sensitive to Fitch's mild (10% increase), medium (25% increase), or more severe (50% increase), default stresses. 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. Fitch, as part of its ongoing monitoring, conducted a review of a small targeted sample of Certegy'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 Expected Rating Sensitivities are further discussed in the corresponding presale report entitled "Flexi ABS Trust 2017-1", published today. SOURCES OF INFORMATION The information below was used in the analysis: - Loan-by-loan data provided by FlexiGroup as of 6 February 2017 - Certegy arrears provided by FlexiGroup as of 13 January 2017 - Historical static loss data provided by FlexiGroup as of 13 January 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 Spencer Wilson Associate Director +612 8256 0320 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 2000 Secondary Analyst Chris Stankovski Director +612 8256 0341 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 at www.fitchratings.com Applicable Criteria 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 Consumer ABS Rating Criteria (pub. 01 Dec 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Related Research Flexi ABS Trust 2017-1 - Appendix here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1018887 Solicitation Status here 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. 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. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. 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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