Fitch Assigns Final Ratings to Series 2013-1 REDS Trust
AUD170m Class A2R notes: 'AAAsf'; Outlook Stable
The class A2R notes were issued to refinance the soft-bullet class A2 notes on 22 August 2016. The class A2 notes were repaid in full from the issuance of the class A2R notes, as the principal reserve balance was zero.
The class A2 notes were originally issued in August 2013 as part of an AUD850m RMBS issue by Bank of Queensland. The notes' refinancing was contemplated in the original issuance. The transaction continues to perform in line with Fitch's expectations at origination and has paid down from AUD850m to approximately AUD423m since issuance.
Ratings for the remaining rated notes are unchanged and were affirmed on 22 February 2016 as follows (note balances as at January 2016):
AUD244.4m Class A1 (ISIN AU0000RDIHA7) 'AAAsf'; Outlook Stable;
The class A2R notes are issued by Perpetual Trustee Company Limited in its capacity as trustee of Series 2013-1 REDS Trust.
KEY RATING DRIVERS
The 'AAAsf' rating assigned to the class A2R notes is supported by the credit enhancement provided by the subordinate class AB, B1 and B2 notes; the liquidity facility, which is equivalent to 1.9% of the outstanding note balance; and Bank of Queensland's mortgage underwriting and servicing capabilities.
The class A2R notes are independent of lenders' mortgage insurance. Unexpected decreases in residential property value, increases in the frequency of foreclosures and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base-case, which could in turn result in negative rating action on the notes.
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 26 March 2015.
Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by Bank of Queensland compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.