S&P: Series 2013-1 REDS Trust Note Ratings Affirmed; Class A2 Note Rating Withdrawn
The class A2 notes were redeemed in full by the issuance of A$170.0 million class A2R notes, as contemplated in the transaction documents. The class A2R issuance amount is equal to the total invested amount of the class A2 note. After the A2 scheduled maturity date, the class A principal will be paid equally to the class A1 and A2R notes.
The ratings reflect:Our view of the credit risk of the underlying collateral portfolio. The pool factor is approximately 49% and comprises 2,401 loans. As of June 30, 2016, loans that are in arrears greater than 30 days comprise 3.1% of the current balance, of which 1.9% are in arrears greater than 90 days. This is above our index levels for prime RMBS arrears of 1.21% and 0.52% for the 30-plus and 90-plus day categories, respectively. However, the portfolio has strengthened, with a weighted-average current loan-to-value ratio (LVR) of 48.1% and weighted-average seasoning of 78.2 months. Our view of the credit support available, which is sufficient to withstand the stresses we apply. The credit support comprises mortgage insurance covering 100% of the face value of all loans, accrued interest, and reasonable costs of enforcement, as well as note subordination for the class A1, class A2R, class AB, and class B1 notes. The class B2 notes rely on excess spread generated by the trust. The benefit of a standby fixed-to-floating interest-rate swap, which is provided by National Australia Bank Ltd. to hedge the mismatch between receipts from any fixed-rate mortgage loans and the variable-rate RMBS. As of June 30, 2016, the proportion of fixed-rate loans is 14.4% of the pool with a term of up to five years. Our view of the various mechanisms to support liquidity within the transaction. These mechanisms, which we believe are sufficient under our stress assumptions to ensure timely payment of interest, include an amortizing liquidity reserve equal to 1.9% of the outstanding invested balance of the notes and principal draws. The availability of an excess spread reserve, which has built up to an initial limit of 0.40% of the aggregate initial invested amount of all notes. The excess spread reserve has amounted to its current limit of A$3.4 million and will be available to ensure timely payment of interest. The availability of an extraordinary expense reserve, which is funded upfront by Bank of Queensland Ltd. to support trust expenses. The reserve will be topped up with available excess spread if drawn down.