OREANDA-NEWS. S&P Global Ratings today assigned its preliminary rating to the class A1-s2 notes of nonconforming residential mortgage-backed securities (RMBS) to be issued by Permanent Custodians Ltd. as trustee of Pepper Residential Securities Trust No.15 (see list). Pepper Residential Securities Trust No.15 is a securitization of nonconforming residential mortgages originated by Pepper HomeLoans Pty Ltd. (Pepper).

The preliminary rating reflects:Our view of the credit risk of the underlying collateral portfolio, including the fact that this is a closed portfolio, which means no further loans have been assigned to the trust after the closing date. Our view that the credit support is sufficient to withstand the stresses we apply. This credit support comprises note subordination for each class of rated note. The availability of a retention amount, amortization amount, and yield reserve, which are funded by excess spread, but at various stages of the transaction's term. They will have separate functions and timeframes, including reducing the balance of senior notes, reducing the balance of the most subordinated notes, and paying senior expenses and interest shortfalls on the class A notes. The extraordinary expense reserve of A$150,000, which was funded by Pepper at closing, is available to meet extraordinary expenses. The reserve will be topped up via excess spread if drawn. Our expectation that the various mechanisms to support liquidity within the transaction, including a liquidity facility equal to 2.5% of the outstanding balance of the notes, and principal draws, are sufficient under our stress assumptions to ensure timely payment of interest. The condition that a minimum margin will be maintained on the assets. The redemption facility providers' unconditional and irrevocable commitment to ensure the full repayment of the stated amount of the class A1-s2 notes on their legal final maturity.