Fitch Affirms 19 PUMA RMBS Tranches; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Sydney-19 November 2020: Fitch Ratings has affirmed 19 note classes from 12 PUMA transactions, which consist of notes backed by pools of first-ranking Australian residential mortgage loans. All mortgages were originated by Macquarie Bank Limited (MBL, A/Negative/F1) and the notes were issued by Perpetual Limited in its capacity as trustee. PUMA Sub-Fund B-1 ----Class A AU3FN0005427; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----Class AB AU3FN0021721; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Masterfund S-10 ----A AU3FN0015293; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----AB AU3FN0015301; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2014-1 ----A-R AU3FN0046579; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2015-2P ----A AU3FN0026803; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----B1 AU3FN0026811; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2013-1 ----A AU0000PUJHA3; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series R Trust ----A AU3FN0045274; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2015-1 ----A-R AU3FN0052494; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----B1-R AU3FN0052502; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2014-2 ----A-R AU0000049249; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2019-1 ----A AU3FN0050126; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Masterfund S-13 ----A AU3FN0017901; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----AB AU3FN0017919; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2015-3 ----A-R AU3FN0055281; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----B1-R AU3FN0055273; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable PUMA Series 2017-1 ----A AU3FN0037222; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable ----B1 AU3FN0037230; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable 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 because Fitch views liquidity protection as sufficient to support the current ratings. The Stable Outlook on all the notes reflects the liquidity support and the notes' ability to withstand the sensitivity to higher defaults stemming from the pandemic. KEY RATING DRIVERS Asset Performance Resilient to Expected Coronavirus Impact: Arrears for 10 of the 12 PUMA transactions at end-September 2020 tracked above Fitch's 3Q20 Dinkum Index for 30+ days and 90+ days arrears of 1.00%, and 0.64%, respectively. The 30+ days arrears ranged from 0.4% for PUMA Series R to 5.6% for PUMA S-13, while 90+ days arrears ranged from 0.1% for PUMA R to 3.2% for PUMA S-10. All transactions had less than 12.1% of loans in the pools on COVID-19 hardship arrangements. Arrears percentages have increased as the transactions amortise; however, arrears balances have not increased substantially and the rated notes have sufficient credit enhancement and excess spread to cover losses. All rated notes of term transactions have subordination that is at least 1.8x greater than the 'AAAsf' portfolio loss from the last model run. Loans in regular hardship are reflected in arrears figures only if they are in arrears while COVID-19 hardship loans are reported in arrears if they were in arrears prior to requesting hardship. Transaction performance has been strong, with low levels of losses that have been covered by lenders' mortgage insurance (LMI) and excess spread. PUMA R has an availability period and therefore Fitch's analysis is based on a proxy pool stressed to pool parameters. Fitch has updated criteria assumptions for Australia to account for the expected effects of the coronavirus pandemic. Fitch applied an arrears adjustment of 1.5 times the five-year average of MBL's mortgage portfolio arrears to December 2019 for each arrears bucket, which increased the weighted-average foreclosure frequency (WAFF) modelled by 0.8%. PUMA R's 'AAAsf' WAFF of 12.9% is driven by the stressed weight-average (WA) unindexed loan/value ratio (LVR) of 65.1%, loans with LVR greater than 80% making up 19.0% of the portfolio, stressed investment loans of 29.8% and Fitch-adjusted 30+ day arrears of 2.0%. The 'AAAsf' WA recovery rate of 50.4% is driven by the stressed portfolio's WA indexed scheduled LVR of 67.4% and the portfolio's 'AAAsf' WA market value decline of 59.8%. See the following links for Fitch's pandemic-related credit views and analytical approach: - "Global Economic Outlook - September 2020 ", published on 7 September 2020, available at www.fitchratings.com/site/re/10135033; - "Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases - Update", published on 8 September 2020, available at www.fitchratings.com/site/re/10135320; 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 48% of the portfolio being granted a payment holiday before needing to draw on principal and liquidity reserves. This is significantly above the proportion of receivables under COVID-19 hardship arrangements, which ranged from 3.0% (PUMA R) to 12.1% (PUMA S-10), at end-September 2020. Credit Enhancement Supports Ratings: PUMA S-10, S-13, 2013-1 and 2015-2P are paying down pro rata, and will revert to sequential paydown, building up credit enhancement, if performance deteriorates significantly. The remaining term transactions are paying sequentially. PUMA Sub-Fund B-1 and PUMA Series R have 10-year revolving periods that end in March 2028 and November 2028, respectively. Fitch believes the risks associated with the long revolving periods are commensurate with the ratings because MBL has a stable product history and eligibility criteria, including portfolio parameters in PUMA Series R that maintain portfolio characteristics during the revolving period. Low Operational Risk: MBL is a registered authorised deposit-taking institution (ADI) headquartered in Sydney. Fitch undertook an onsite operational review and found that the operations of the originator and Macquarie Securitisation Limited (MSL), the servicer, were comparable with market standards and that there were no material changes that may affect MBL's ability to undertake administration or MSL's collection activities. MSL's collection timelines, policies and procedures are in line with other conforming lenders in Australia. MBL's and MSL's activities have not been disrupted due to the coronavirus pandemic as staff work remotely. Economic Rebound to Support Stable Outlook: Fitch expects loan performance to deteriorate in the near term, but to continue to support the Stable Outlook on the rated notes. Fitch forecasts Australia's GDP to contract by 3.6% in 2020, with the unemployment rate at 7.1%. This is to be partially offset by a low Official Cash Rate of 0.10% and the application of both central bank and government stimulus measures. Fitch expects GDP growth to bounce back to 3.9% in 2021, with the unemployment rate falling to 6.7%. The Stable Outlook on the notes reflects their liquidity support and ability to withstand the sensitivity to higher defaults stemming from the pandemic. 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, an upgrade sensitivity stress is not relevant. Downgrade Sensitivity Fitch's previous rating sensitivities for each respective transaction were discussed in: - rating action commentary for PUMA S-10, published on 20 February 2018, available at www.fitchratings.com/site/pr/10020673; - rating action commentary for PUMA S-13, published on 20 February 2018, available at www.fitchratings.com/site/pr/10020673; - rating action commentary for PUMA 2013-1, published on 13 May 2015, available at www.fitchratings.com/site/pr/984558; - rating action commentary for PUMA 2014-1, published on 24 August 2020, available at www.fitchratings.com/site/pr/10133264; - rating action commentary for PUMA 2014-2, published on 17 July 2019, available at www.fitchratings.com/site/pr/10082445; - rating action commentary for PUMA 2015-1, published on 23 February 2020, available at www.fitchratings.com/site/pr/10111349; - rating action commentary for PUMA 2015-2P, published on 20 February 2018, available at www.fitchratings.com/site/pr/10020673; - rating action commentary for PUMA 2015-3, published on 24 August 2020, available at www.fitchratings.com/site/pr/10133264; - rating action commentary for PUMA 2017-1, published on 21 August 2017, available at www.fitchratings.com/site/pr/1028080; - rating action commentary for PUMA 2019-1, published on 25 September 2019, available at www.fitchratings.com/site/pr/10090350; - rating action commentary for PUMA B-1, published on 20 February 2018, available at www.fitchratings.com/site/pr/10020673; and - rating action commentary for PUMA R, published on 25 October 2018, available at www.fitchratings.com/site/pr/10049333. 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. The 'AAAsf' rated notes of the transactions have subordination that is at least 1.04x of 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. There were no findings that were material to this analysis. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of PUMA B-1's initial transaction closing. Prior to PUMA 2014-2's closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Fitch did not review the results of a third-party assessment conducted on the asset portfolio information prior to the closing of PUMA Masterfund S-10, PUMA Masterfund S-13, PUMA Series 2013-1, PUMA Series 2014-1, PUMA Series 2015-1, PUMA Series 2015-2P and PUMA Series 2015-3. Fitch sought to receive a third-party assessment conducted on the asset portfolio information prior to the closing of PUMA Series 2017-1, PUMA Series R and PUMA Series 2019-1, but none was available for these transactions. As part of its ongoing monitoring, Fitch reviewed a small targeted sample of MBL'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 portfolios. Overall, Fitch's assessment of the information on the asset pools 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'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg Contacts: Surveillance Rating Analyst Timothy Groombridge, Associate Director +61 2 8256 0339 Fitch Australia Pty Ltd Suite 15.01, Level 15 135 King Street Sydney 2000 Committee Chairperson Natasha Vojvodic, Senior Director +61 2 8256 0350 Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com Additional information is available on www.fitchratings.com Applicable Model Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s). 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