OREANDA-NEWS. Fitch Ratings has assigned final ratings to MTF Torana Trust 2016's automotive-backed floating-rate notes. The issuance consists of notes backed by automotive loan receivables originated by Motor Trade Finance Ltd (MTF). The ratings are as follows:

NZD194.04m Class A notes: 'AAAsf'; Outlook Stable

NZD7.33m Class B notes: 'AAsf'; Outlook Stable

NZD6.42m Class C notes: 'Asf'; Outlook Stable

NZD2.93m Class D notes: 'BBBsf'; Outlook Stable

NZD2.75m Class E notes: 'BBsf'; Outlook Stable

NZD1.32m Class F notes: 'Bsf'; Outlook Stable

NZD5.21m Seller notes: 'NRsf'

The notes were issued by Trustees Executors Limited in its capacity as trustee of MTF Torana Trust 2016.

As at the cut-off date, the total collateral pool consisted of 20,906 auto loan receivables totalling approximately NZD217.8m, with an average obligor exposure of NZD10,418. The loan receivables, originated by MTF, are amortising principal and interest loans for both new (8.1% of the portfolio) and used (91.9%) vehicles, with a portfolio weighted-average (WA) seasoning and remaining contract term of 7.6 and 33.8 months, respectively. The collateral pool is of similar credit quality as the previous MTF Valiant Trust 2014 (Valiant) transaction. The transaction structure replicates the previous Valiant transaction, which includes a revolving period of two years from closing that is contingent upon there being no stop origination events subsisting. During the two year period, loans may be substituted, subject to eligibility criteria, which includes a maximum exposure of NZD100,000 and a minimum pool yield threshold.

KEY RATING DRIVERS

Asset Performance: Historical net-losses have been minimal due to the alignment of interests between MTF and the originating parties via a back-to-back loan agreement.

Yield Support Mechanism: The WA yield generated by the cash balance held in the designated account and the receivables pool must remain above 8% during the revolving period. This calculation is weighted by the remaining term of the contracts to ensure yield is maintained as the pool amortises. Fitch's cash flow analysis tested that excess was available under all stressed scenarios tested.

Granular Portfolio Parameters: Wide-ranging parameters manage portfolio concentrations. These include, but are not limited to, controls on high-risk loans, contract size, geographic distribution, single-dealer and franchisee concentration, maximum obligor exposure and restrictions on non-standard motor vehicles.

Stop-Origination Triggers: The revolving period does expose noteholders to additional risks with respect to a longer time-horizon or portfolio asset-quality. The revolving period is limited to two years from closing, unless stop-origination triggers are met. These include the above-mentioned pool parameters and yield support levels - along with, but not limited to, performance-based arrears, loss and charge-off stop-origination triggers.

Excess Spread: Once 30+ day arrears, averaged over the previous three-month period, exceed 3.5%, half of the available excess will be allocated to the excess spread reserve. If a stop-origination event subsists, all the available excess will be allocated to the excess spread reserve. If the ratings of any notes are less than that issued at closing, any proceeds held may be used to repay principal on the rated notes after covering income and loss shortfalls.

RATING SENSITIVITIES

Increases in the frequency of defaults could produce loss levels higher than Fitch's base case, which could result in negative rating actions on the notes. Fitch evaluated the sensitivity of the ratings on MTF Torana Trust 2016 to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found that collectively, the ratings of the class A and C notes were susceptible to downgrades under all stress levels tested (these stresses being 10%, 25% and 50% increases in defaults), while the class B, D, E and F notes remain susceptible under medium (25% increase) to severe (50% increase) default stress.

Recovery scenarios, whereby recovery rate assumptions are decreased, showed that the ratings of the class A, B and F notes were affected under only severe (50% decrease) scenarios, while the class C, D and E notes were affected under medium (25% decrease in recoveries) and severe (50% decrease in recoveries).

The ratings of the class A, B, C, D and E notes were adversely affected under all combined stress scenarios of 10% increase in defaults and 10% decrease in recoveries, 25% increase in defaults and 25% decrease in recoveries and 50% increase in defaults and 50% decrease in recoveries, while the class F notes were the only class affected only under moderate and severe scenarios of a 25% increase in defaults and 25% decrease in recoveries and a 50% increase in defaults and 50% decrease in recoveries, respectively.

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) 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

Fitch conducted a review of 10 sample loan files focusing on the underwriting procedures conducted by MTF compared to MTF's 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.

Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "MTF Torana Trust 2016", published today. Included as an appendix to the report are a description of the representations, warranties and enforcement mechanisms.