OREANDA-NEWS. S&P Global Ratings today raised its ratings on four classes of notes issued by Perpetual Trustee Co. Ltd. as trustee of RedZed Trust in respect of Series 2014-1 (see list). At the same time, we affirmed our ratings on the remaining rated classes of notes.

The rating actions reflect:Our view of the credit risk of the underlying collateral portfolio, which consists of loans to nonconforming borrowers originated by RedZed Lending Solutions Pty Ltd. As of July 31, 2016, the pool has a current weighted-average loan-to-value ratio of 70.4% and weighted-average seasoning of 5.4 years. The pool has paid down significantly since close, the bond factor as of July 31, 2016, is approximately 39%, and as a result the pool has become more concentrated. A total of 196 consolidated loans remain in the pool, with a total loan balance of approximately A$59.7 million. Our criteria for Australian residential mortgage-backed securities (RMBS) consider an archetypical pool to contain at least 250 consolidated mortgage loans. As of July 31, 2016, 4.0% of the asset pool is in arrears, with 3.3% in arrears by more than 90 days. We have assumed that loans in arrears for more than 90 days have defaulted, in line with our "Australian RMBS Rating Methodology And Assumptions" criteria, published Sept. 1, 2011. However, losses to date have been minimal--approximately A$0.1 million, or 0.2% of the original pool balance--and covered by excess spread. Due to the sequential payment structure for the majority of the transaction's life to date, significant credit support has built up to each class of rated notes. The amount of credit support provided to each class of rated notes is in excess of the minimum amount assessed as commensurate with each respective rating level and is thereby currently sufficient to withstand the stresses commensurate with the ratings. The pool is becoming more concentrated, however, meaning there is growing potential for tail-end risk, and the lower-rated notes would be more susceptible should this risk materialize. Our expectation that the various mechanisms to support liquidity within the transaction, including a liquidity facility equal to 2.5% of outstanding balance of the notes, and principal draws are sufficient under our stress assumptions to ensure timely payment of interest. The availability of a retention amount built from excess spread before the call date, which is applied to reduce the balance outstanding of the most subordinated rated note at that time and serves to create overcollateralization in the transaction. Approximately $919,000 of overcollateralization has been created as of July 31, 2016.We have assessed pool concentrations by sizing an alternate loss scenario for the pool. Under this scenario, the top 10 loans, at the 'AAA' rating level, default and are recovered upon. The loss severity for each loan is the higher of 50%, the loan's loss severity, and the pool's weighted-average loss severity. The expected loss for the pool is the higher of that number, and the number sized applying our "Australian RMBS Rating Methodology And Assumptions" criteria, published Sept. 1, 2011. This approach is consistent with the "U. S. RMBS Surveillance Credit And Cash Flow Analysis For Pre-2009 Originations" criteria, published March 2, 2016.