OREANDA-NEWS. Fitch Ratings has upgraded four tranches of Series 2012-1E REDS EHP Trust (Series 2012-1E), affirmed two other tranches for the same transaction. At the same time, Fitch has affirmed the ratings of all Series 2013-1 REDS EHP Trust (Series 2013-1) and Series 2014-1 REDS EHP (Series 2014-1) tranches. The transactions are securitisations of first-ranking small balance auto and equipment loans originated by BOQ Equipment Finance Limited. The rating actions are listed below (note balances are as at 31 January 2015).

Series 2012-1E REDS EHP Trust:
AUD45.1m Class A-2A (ISIN AU0000RFAHA9) notes affirmed at 'AAAsf'; Outlook Stable;
GBP14.4m Class A-2G (ISIN XS0784745050) notes affirmed at 'AAAsf'; Outlook Stable;
AUD5.4m Class B (ISIN AU3FN0015558) notes upgraded to 'AAAsf' from 'AAsf'; Outlook Stable;
AUD4.3m Class C (ISIN AU3FN0015566) notes upgraded to 'AAsf' from Asf'; Outlook Stable;
AUD4.1m Class D (ISIN AU3FN0015574) notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable; and
AUD3.7m Class E (ISIN AU3FN0015582) notes upgraded to 'BBBsf' from 'BBsf'; Outlook Stable.

Series 2013-1 REDS EHP Trust:
AUD275.1m Class A (ISIN AU3FN0019097) notes affirmed at 'AAAsf'; Outlook Stable;
AUD24.5m Class B (ISIN AU3FN0019105) notes affirmed at 'AAsf'; Outlook Stable;
AUD18.6m Class C (ISIN AU3FN0019113) notes affirmed at 'Asf'; Outlook Stable;
AUD12.7m Class D (ISIN AU3FN0019121) notes affirmed at 'BBBsf'; Outlook Stable; and
AUD13.7m Class E (ISIN AU3FN0019139) notes affirmed at 'BBsf'; Outlook Stable.

Series 2014-1 REDS EHP Trust:
AUD647.6m Class A (ISIN AU3FN0024766) notes affirmed at 'AAAsf'; Outlook Stable;
AUD41.8m Class B (ISIN AU3FN0024774) notes affirmed at 'AAsf'; Outlook Stable;
AUD49.4m Class C (ISIN AU3FN0024782) notes affirmed at 'Asf'; Outlook Stable;
AUD22.8m Class D (ISIN AU3FN0024790) notes affirmed at 'BBBsf'; Outlook Stable; and
AUD23.8m Class E (ISIN AU3FN0024808) notes affirmed at 'BBsf'; Outlook Stable.

KEY RATING DRIVERS
The three notch upgrade to Series 2012-1E's Class B, C, and D notes reflects: losses that have been substantially lower than Fitch's stressed assumptions; an increase in available credit enhancement (CE) due to sequential pay down of the notes; the stable credit quality and performance of the pool; and Fitch's expectations of continued benign economic conditions in Australia in the near term. At 31 January 2015, 30+ days arrears were 3.2%, with net losses since close totalling AUD3.4m, 0.38% of the original pool.

The affirmations of Series 2013-1 and Series 2014-1 reflect Fitch's view that: available CE is sufficient to support the notes at their current rating levels; the stable credit quality and performance of the pool; and Fitch's expectations of Australia's economic conditions.

The transactions' performance falls within Fitch's base-case expectations. At 31 January 2015 net losses experienced since closing were 0.86% and 0.17% respectively, and 30+ days arrears were 1.4% and 0.5% respectively. To date, excess spread has been more than sufficient to cover for losses experienced in Series 2012-1E and Series 2014-1. Series 2013-1 experienced one charge off to the seller note in April 2014, which was fully paid off in the following month using excess spread.

RATING SENSITIVITIES
Fitch considers the prospects for downgrades are remote given the level of subordination and excess spread available on all transactions. At the modelled 'AAAsf' gross loss default rates of 20.8% from transaction close, Series 2012-1E's Class A notes could withstand 13% of additional defaults with a fall in the marginal recovery rate to 22.8% before the break-even CE level for the Class A notes would be breached. The Class B notes' 'AAAsf' gross loss default rate is relatively more sensitive to an increase in additional defaults and could withstand an increase of 4.5% before the break-even CE would be breached. Series 2012-1E's lower rated notes are relatively more sensitive. According to Fitch's analysis, the seller note is sufficient to protect all rated notes against the default with zero recovery of the ten largest loans, plus all mining sector loans.

In the case of Series 2013-1 and Series 2014-1, modelled 'AAAsf' gross loss default rates at transaction close were 22.2% and 17.7%, respectively. At these levels the Class A notes could withstand additional defaults of 13.5% and 6.4% respectively before the breakeven CE level would be breached. The lower rated notes on both transactions are more sensitive to increases in default rates, but can with stand an additional 1.4% of defaults at a minimum.

Fitch's initial key rating drivers and rating sensitivities are further discussed in the transactions' corresponding New Issue reports listed under "Related Research". Included as an appendix to all three transactions' reports are a description of the representations, warranties, and enforcement mechanisms.

A comparison of the transactions' representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below.