Fitch Assigns Expected Ratings to SMART ABS Series 2015-3US Trust
USD126.0m Class A-1 notes: 'F1+(EXP)sf';
USD124.0m Class A-2 notes: 'AAA(EXP)sf'; Stable;
USD120.0m Class A-3 notes: 'AAA(EXP)sf'; Stable;
AUD186.0m Class A-4 notes: 'AAA(EXP)sf'; Stable;
AUD16.43m Class B notes: 'AA(EXP)sf'; Stable; and
AUD90.35m Seller notes: 'NRsf'.
The notes will be issued by Perpetual Trustee Company Limited in its capacity as trustee of SMART ABS Series 2015-3US Trust.
The collateral backing the SMART ABS Series 2015-3US Trust transaction is of similar credit quality to prior pools securitised under the SMART programme. The pool comprises lease and loan receivables, backed by motor vehicles with weighted-average (WA) seasoning of 8.1 months and an average receivable size of AUD30,461. Novated contracts make up 54.3% of the pool and contribute to the low arrears on prior SMART transactions.
KEY RATING DRIVERS
Base-Case Loss Unchanged: Historical gross losses by quarterly vintage are unchanged; novated leases (car) range from 0.3% to 1.5%; non-novated leases (cars) from 1.0% to 3.2%; trucks 0.5%-5.0%; and consumer 0.8%-5.0%. Macquarie Leasing has originated consumer loans directly to individual retail consumers since 2008. Historical gross loss information for the consumer products is limited. Delinquencies more than 30 days have traditionally tracked below 0.9% for the Macquarie Leasing book.
Sufficient Enhancement: The SMART ABS Series 2015-3US Trust transaction incorporates a sequential pay/pro rata pay structure, consistent with prior transactions. Initial hard credit enhancement (CE) to the 'AAAsf' notes totals 13.0%. Pro rata paydown will commence when hard CE reaches 18.9%. Overall, CE is sufficient to cover Fitch's 'AAAsf' stressed cumulative net loss (CNL) assumption in all of its scenarios.
Available Liquidity: Liquidity support is provided by the liquidity reserve and will ensure stable cash flows for the required payments. The reserve will initially be funded at AUD8.2m on the closing date (funded by Macquarie Bank) and subsequently the greater of: 1) 1.0% of the aggregate invested amount of the notes for that payment date; and 2) AUD300,000.
Balloon Loans in Portfolio: The pool comprises amortising principal, and interest lease and loan receivables, with varying balloon amounts payable at maturity. The WA balloon by original balance is 21.5%.
EXPECTED RATING SENSITIVITIES
Unexpected increases in the frequency of foreclosures, and the loss severity on defaulted loans could produce loss levels higher than Fitch's base case, which could in turn result in negative rating actions on the notes. Fitch has evaluated the sensitivity of the expected ratings assigned to SMART ABS Series 2015-3US Trust to increased gross default levels, and decreased recovery rates over the life of the transaction.
Its analysis found that the Class A-1, A-2, A-3 and B notes were not susceptible to downgrades under Fitch's mild (10% increase), moderate (25% increase) and severe default( 50% increase) scenarios. The Class A-4 notes are susceptible to a downgrade to 'AAsf' in a severe default scenario.
Recovery scenarios, whereby recovery rate assumptions are decreased under mild (10% decrease), moderate (25% decrease) and severe (50% decrease) scenarios, showed that all notes were not susceptible to downgrades.
The analysis also showed that under a combination of severe default and recovery scenarios, the Class A-4 and Class B notes would be downgraded to 'AAsf' and 'Asf', respectively. All other notes remain unchanged.
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 Macquarie Leasing Pty Limited 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.
Key Rating Drivers and Expected Rating Sensitivities are further discussed in the corresponding presale report entitled, "SMART ABS Series 2015-3US Trust", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.