Fitch Affirms 10 Barton Trust RMBS Tranches; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Sydney-09 February 2021: Fitch Ratings has affirmed 10 note classes from five Barton Trust transactions, which consist of notes backed by pools of first-ranking Australian residential mortgage loans originated by Beyond Bank Australia Limited (Beyond Bank). The notes were issued by Perpetual Corporate Trust Limited in its capacity as trustee. The social and market disruptions caused by the coronavirus and related containment measures have not negatively affected the ratings because there is sufficient credit enhancement to cover our expectation of higher defaults and Fitch also considers the liquidity protection sufficient to support the current ratings. The Stable Outlook on the notes reflects their liquidity support and ability to withstand the sensitivity to higher defaults stemming from the coronavirus pandemic. Barton Series 2017-1 Trust ----A-1 AU3FN0037024; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----A-2 AU3FN0037032; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable Barton Series 2013-1R Trust ----A AU3FN0045035; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable Barton Series 2011-1 Trust ----A2 AU3FN0012837; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----AB AU3FN0012845; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable Barton Series 2019-1 Trust ----A-1 AU3FN0051736; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----A-2 AU3FN0051744; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable Barton Series 2014-1 Trust ----A AU3FN0025631; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----AB AU3FN0025649; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----AC AU3FN0025656; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable KEY RATING DRIVERS Asset Performance Resilient to Pandemic: The transactions' 30+ day and 90+ day arrears as of end-December 2020 were all below Fitch's 3Q20 Dinkum RMBS Index of 1.00% and 0.64%, respectively, with the exception of Barton Series 2011-1 Trust. The 30+ day arrears ranged from 0.0% for Barton Series 2014-1 Trust to 0.2% for Barton Series 2019-1 Trust, and the 90+ day arrears ranged from 0.0% for Barton 2014-1 and Barton Series 2017-1 Trust to 0.1% for Barton 2019-1. Barton 2011-1's 30+ day arrears of 1.9% and 90+ day arrears of 1.4% were above the index, reflecting its low bond factor of 11%. Transaction performance has been strong, with low levels of losses that have been covered by lenders' mortgage insurance (LMI) and excess spread. All rated notes have subordination that is at least 1.3x greater than the 'AAAsf' portfolio loss from the last model run. See the following links for Fitch's pandemic-related credit views and analytical approach: - "Global Economic Outlook - December 2020", published on 7 December 2020, available at www.fitchratings.com/site/re/10145707; - "Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases - Update", published on 7 December 2020, available at www.fitchratings.com/site/re/10145938; and - "Global SF Rating Assumptions Updated to Reflect Coronavirus Risk", published on 3 April 2020, available at www.fitchratings.com/site/pr/10117224. Analytical notes relevant for Australian and New Zealand RMBS transactions are discussed in the following commentary: - "Fitch Ratings' Approach to Addressing Coronavirus-Related Risks for Australian, NZ RMBS", published on 5 May 2020, available at www.fitchratings.com/site/pr/10120792; and - "Fitch Ratings Updates Australia, NZ RMBS Criteria Assumptions on Coronavirus Effects", published on 28 July 2020, available at www.fitchratings.com/site/pr/10130287. Limited Liquidity Risk from Payment Holidays: We have reviewed the ability of the transactions to survive a significant proportion of borrowers taking a payment holiday. All transactions can withstand at least 45.1% of the portfolio being granted a payment holiday before needing to draw on principal collections or their liquidity reserves. This is significantly above the proportion of receivables under Covid-19 hardship arrangements, which ranged from 0.3% for Barton 2011-1 and 2019-1, to 1.6% for Barton 2014-1 at end-December 2020. Credit Enhancement Supports Ratings: Barton 2014-1 is paying down pro rata, and will revert to sequential paydown, building up credit enhancement, if performance deteriorates significantly or at the call option date. The remaining transactions, with the exception of Barton Series 2013-1R Trust, are currently paying sequentially. Barton 2013-1R has a 10-year revolving period ending in July 2023. The risks associated with the long revolving period are mitigated by Beyond Bank's stable product history and the transaction's eligibility criteria and portfolio parameters, which ensure that portfolio characteristics are maintained during the revolving period. Low Operational Risk: Beyond Bank is an authorised deposit-taking institution, headquartered in Adelaide, Australia. Fitch undertook an operational review and found that the operations of the originator and servicer were comparable with market standards and that there were no material changes that may affect Beyond Bank's ongoing ability to undertake administration, collection and servicing activities. The collection and servicing activities have not been disrupted due to the pandemic because staff can work remotely and have access to the office, if needed. Recovery to Support Stable Outlook: Fitch expects loan performance to deteriorate in the near term amid historically high unemployment, but to continue to support the Stable Outlook on the rated notes. Fitch forecasts Australia's GDP to grow by 3.8% in 2021, with the unemployment rate improving to 6.2%. We expect GDP growth to stabilise in 2022 at 2.7% and the unemployment rate to continue to improve, falling to 5.6%. The pools are geographically concentrated in South Australia (SA) and the Australian Capital Territory (ACT), reflective of Beyond Bank's operational focus in the regions. The SA and ACT governments expect gross state product to contract 0.75% and 1.50%, respectively, in the financial year ending June 2021 (FY21) before rebounding to 4.25% and 4.00% growth in FY22. The key rating drivers listed in the applicable sector criteria, but not mentioned above, are not material to this rating action. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: The rated notes are at 'AAAsf', which is the highest level on Fitch's scale. The ratings cannot be upgraded. Factors that could, individually or collectively, lead to negative rating action/downgrade: A longer pandemic than Fitch expects that leads to deterioration in macroeconomic fundamentals and consumers' financial position in Australia beyond Fitch's baseline scenario. Available credit enhancement cannot compensate for higher credit losses and cash flow stresses, all else being equal. Upgrade Sensitivity As the notes are rated 'AAAsf', upgrade sensitivity stresses are not relevant. Downgrade Sensitivity Fitch's previous rating sensitivities for each respective transaction were discussed in: - rating action commentary for Barton 2011-1, published on 14 April 2011, available at www.fitchratings.com/site/pr/704102; - rating action commentary for Barton 2013-1R, published on 1 July 2013, available at www.fitchratings.com/site/pr/795121; - rating action commentary for Barton 2014-1, published on 27 November 2014, available at www.fitchratings.com/site/pr/936575; - rating action commentary for Barton 2017-1, published on 20 July 2017, available at www.fitchratings.com/site/pr/1026747; - rating action commentary for Barton 2019-1, published on 5 December 2019, available at www.fitchratings.com/site/pr/10103815; Coronavirus Downside Scenario Sensitivity Under Fitch's downside scenario, re-emergence of infections in major economies prolongs the health crisis and confidence shock, prompts extensions or renewals of lockdown measures and prevents a recovery in financial markets. All rated notes have subordination that is at least 1.3x greater than the 'AAAsf' portfolio loss from the most recent model run. Best/Worst Case Rating Scenario International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579. 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. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information as part of its ongoing monitoring. Prior to the closing of Barton 2011-1, 2013-1R and 2014-1, Fitch did not review the results of a third-party assessment conducted on the asset portfolio information. Prior to the closing of Barton 2017-1 and 2019-1, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was made available to Fitch for these transactions. As part of its ongoing monitoring, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. 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