Fitch Affirms 26 PUMA RMBS Tranches; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Sydney-January 24: Fitch Ratings has affirmed 26 note classes from 14 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/Stable/F1) and the notes were issued by Perpetual Limited in its capacity as trustee. A full list of rating actions is at the end of this ratings action commentary. KEY RATING DRIVERS Operational Risk: MBL is an authorised deposit-taking institution headquartered in Sydney, Australia. Fitch undertook an onsite 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 MBL's ongoing ability to undertake administration and collection activities. MBL's collection timelines, policies and procedures are in line with other conforming lenders in Australia, as evident from the historical performance of PUMA transactions. Asset Analysis: The asset model was not re-run for any of the transactions in accordance with Fitch's criteria, as all rated notes are rated at the highest possible level; asset composition and performance have not deteriorated significantly and there have been no material changes to asset assumptions since the last asset analysis. At end-November 2018, 30+ day arrears of the trusts, except for PUMA Series R Trust and PUMA Series 2017-1, tracked above Fitch's 3Q18 Dinkum RMBS Index of 1.04%. Arrears ranged between 0.1% for (PUMA R) and 9.8% (PUMA Masterfund S-10). PUMA Masterfund S-10 consisted of 45.6% low-documentation borrowers. Arrears percentages have increased as the transactions amortise, however, arrears balances are stable and the rated notes have sufficient credit enhancement and excess spread to cover losses. MBL has advised that there are hardship loans that may not be included in the arrears figures. Transaction performance has been strong, with all losses covered by lenders' mortgage insurance (LMI) and excess spread. PUMA Sub-Fund B-1 had the highest losses since closing of AUD19.7 million at end-November 2018, while PUMA Series 2014-2 had the lowest, at AUD110,000. PUMA 2017-1 and PUMA R closed in August 2017 and October 2018, respectively, and have had no losses. LMI is provided by QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength Rating: AA-/Stable) and Genworth Financial (NYSE:GNW) Mortgage Insurance Pty Limited (Insurer Financial Strength Rating: A+/Stable). Liability Analysis: Cash flow analysis was not performed for any of the transactions, as all rated notes are rated at the highest possible level; cash flow distribution has been within our expectations since the last cash flow model analysis and there have been no material changes to cash flow assumptions. PUMA B-1 and PUMA R have 10-year revolving periods, which 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 R that maintain portfolio characteristics during the revolving period. Fitch considers the level of concentration in the transaction's mortgage portfolio to be a key factor in assessing tail risk. PUMA S-10's tail risk is mitigated by strong asset performance and triggers that cause the transaction to switch to sequential amortisation if the trust has sustained a loss or default. Macroeconomic Factors: Fitch expects stable mortgage performance, supported by sustained economic expansion in Australia. The economic outlook is driven by Fitch's forecast for stable GDP growth of 2.7% and one 25bp cash rate increase in 2019. RATING SENSITIVITIES Fitch does not expect the ratings to be affected by any foreseeable change in performance. The prospect of a downgrade is remote, given the level of subordination to all rated notes and pool performance to date. An upgrade to the ratings of PUMA Masterfund P-16's class B notes was considered, but the rating was constrained due to credit enhancement being provided by a non-replenishing loss reserve. 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 P-16's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its rating analysis was adequately reliable. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of PUMA B-1's initial 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 P-17, PUMA Masterfund S-9, PUMA 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 2017-1 and PUMA R, 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 portfolio. Overall, Fitch's assessment of the asset-pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by MBL as at 30 November 2018 Transaction reporting data provided by MBL as at 30 November 2018 The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. The full list of rating actions is shown below: PUMA Masterfund P-16: AUD74.2 million Class A3 (AU3FN0011508) notes affirmed at 'AAAsf'; Outlook Stable; AUD9.4 million Class AB (AU0000PUBHA0) notes affirmed at 'AAAsf'; Outlook Stable; and AUD3.9 million Class B (AU3FN0011516) notes affirmed at 'AAsf'; Outlook Stable. PUMA Masterfund P-17 AUD51.7 million Class A-1 (AU3FN0013017) notes affirmed at 'AAAsf'; Outlook Stable; AUD36.5 million Class A-2 (AU3FN0013025) notes affirmed at 'AAAsf'; Outlook Stable; and AUD10.4 million Class AB (AU3FN0013033) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Masterfund S-9 AUD49.9 million Class A (AU3FN0012761) notes affirmed at 'AAAsf'; Outlook Stable; and AUD6.2 million Class AB (AU3FN0012779) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Masterfund S-10 AUD28.8 million Class A (AU3FN0015293) notes affirmed at 'AAAsf'; Outlook Stable; and AUD4.6 million Class AB (AU3FN0015301) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Masterfund S-13 AUD51.5 million Class A (AU3FN0017901) notes affirmed at 'AAAsf'; Outlook Stable; and AUD8.6 million Class AB (AU3FN0017919) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2013-1 AUD237.7 million Class A (AU0000PUJHA3) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2014-1 AUD260.0 million Class A (AU0000PUKHA1) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2014-2 AUD213.8 million Class A (AU0000PUOHA3) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2015-1 AUD552.9 million Class A (AU0000PUUHA0) notes affirmed at 'AAAsf'; Outlook Stable; and AUD120.0 million Class B1 (AU3FN0026282) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2015-2P AUD192.1 million Class A (AU3FN0026803) notes affirmed at 'AAAsf'; Outlook Stable; and AUD6.9 million Class B1 (AU3FN0026811) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2015-3 AUD491.0 million Class A (AU3FN0028015) notes affirmed at 'AAAsf'; Outlook Stable; and AUD90.0 million Class B1 (AU3FN0028023) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series 2017-1 AUD622.8 million Class A (AU3FN0037222) notes affirmed at 'AAAsf'; Outlook Stable; and AUD60.0 million Class B1 (AU3FN0037230) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Sub-Fund B-1 AUD13,364.6 million Class A (AU3FN0005427) notes affirmed at 'AAAsf'; Outlook Stable; and AUD1,108.7 million Class AB (AU3FN0021721) notes affirmed at 'AAAsf'; Outlook Stable. PUMA Series R Trust AUD3,080.0 million Class A (AU3FN0045274) notes affirmed at 'AAAsf'; Outlook Stable Contacts: Lead Surveillance Analyst Tim Groombridge Associate Director +61 2 8256 0339 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 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 Criteria APAC Residential Mortgage Rating Criteria (pub. 11 Jan 2019) https://www.fitchratings.com/site/re/10057538 Global Structured Finance Rating Criteria (pub. 15 May 2018) https://www.fitchratings.com/site/re/10029600 RMBS Lenders' Mortgage Insurance Rating Criteria (pub. 03 Apr 2018) https://www.fitchratings.com/site/re/10025397 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039504 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039505 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10059882 Solicitation Status https://www.fitchratings.com/site/pr/10059882#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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