Fitch Assigns Final Ratings to Crusade ABS Series 2016-1 Trust
OREANDA-NEWS. Fitch Ratings has assigned final ratings to Crusade ABS Series 2016-1 Trust's floating-rate notes. The issuance consists of notes backed by automotive lease and loan receivables originated by Westpac Banking Corporation (Westpac, AA-/Stable/F1+) and St.George Finance Limited (St.George). The ratings are as follows:
AUD1,053.0m Class A notes: 'AAAsf'; Outlook Stable
AUD65.0m Class B notes: 'AAsf'; Outlook Stable
AUD52.0m Class C notes: 'Asf'; Outlook Stable
AUD36.4m Class D notes: 'BBBsf'; Outlook Stable
AUD26.0m Class E notes: 'BBsf'; Outlook Stable
AUD67.6m Seller notes: NRsf.
The notes have been issued by Perpetual Corporate Trust Limited in its capacity as trustee of Crusade ABS Series 2016-1 Trust.
The collateral backing the Crusade 2016-1 transaction, statistically, is of similar credit quality to prior pools securitised under the Crusade ABS programme. The pool comprises receivables backed by motor vehicles with a WA seasoning of 16 months and average receivable size of AUD21,795. The WA balloon residual percentage is 7.1% (percentage of the original outstanding balance of the receivable).
KEY RATING DRIVERS
Asset Origination: The receivables will be sourced from Westpac and St.George, as the lenders of record. The receivables are originated under the same credit policy, while the servicer of record is Westpac. Collections are outsourced to Collection House Ltd and overseen by Westpac. St.George is a wholly owned subsidiary of Westpac.
Consumer Finance Composition: Consumer finance receivables comprise 66.6% of the portfolio. Consumer finance has higher loss levels than other product types and longer lease terms of up to 84 months. Fitch has taken this into account in the rating analysis.
Low Historical Defaults: The receivables book has experienced relatively low levels of defaults to date, with the majority of quarterly vintage gross loss percentages ranging from 1.3%-3.8% for passenger vehicles. Delinquencies greater than 30 days have generally tracked below 3.0%.
Consistent Credit Quality: The collateral backing the Crusade 2016-1 transaction, statistically, is of similar credit quality to prior pools securitised under the Crusade ABS programme. The pool comprises receivables backed by motor vehicles with a WA seasoning of 16 months and average receivable size of AUD21,795. The WA balloon residual percentage is 7.1% (percentage of the original outstanding balance of the receivable).
Eligibility and Pool Parameters: A substitution period of 12 months will allow receivables to be sold to the trust on a regular basis, which will be subject to eligibility and pool parameters to ensure consistent portfolio characteristics. All substitutions will cease upon unreimbursed charge-offs exceeding 1%; if an event of default or servicer termination event subsists; or if the average percentage of loans more than 90 days in arrears over the prior three months exceeds 3%.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, likely resulting in a decline in credit enhancement and remaining loss-coverage levels available to the notes.
Fitch has evaluated the sensitivity of the ratings assigned to Crusade ABS Series 2016-1 Trust to increased gross default levels and decreased recovery rates over the life of the transaction. Its analysis found that all the notes' ratings are not susceptible to downgrades under Fitch's mild (10% increase) default scenario. Under a moderate (25% increase) default scenario, the Class A and Class B notes are subject to a one notch downgrade. In a severe (50% increase) default scenario, all notes other than the Class E note are subject to downgrades of between one and two notches.
Recovery scenarios, whereby recovery rate assumptions are decreased, showed that no notes were impacted under each scenario tested. These include mild (10% decrease), moderate (25% decrease) and severe (50% decrease) stress scenarios.
The analysis showed that under a combination of default and recovery stress scenarios, the Class A, B, and C notes would be downgraded by one notch in a moderate stress scenario (25% increase in defaults and 25% decrease in recovery rates). In Fitch's severe scenario (50% increase in defaults and 50% decrease in recovery rates) the Class A notes would be downgraded to 'AA-sf'; the Class B notes downgraded to 'A-sf' and the class C, D and E notes to 'BBBsf', 'BBsf' and 'B+sf', respectively.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by the originators compared with the originators 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 "Crusade ABS Series 2016-1 Trust", published today. Included as an appendix to the report are a description of the representations, warranties and enforcement mechanisms.