(The following statement was released by the rating agency) Fitch Ratings-Sydney-February 02: Fitch Ratings has affirmed 26 note classes from nine Challenger and Interstar transactions. These transactions are securitisations of Australian conforming residential mortgages originated through a network of mortgage originators and brokers under the Challenger Millennium Trust and Interstar Millennium Trust Securitisation programmes. The notes are issued by Perpetual Trustees Victoria Limited in its capacity as trustee. Interstar Millennium Series 2004-5 Trust ----AB AU300INTA032; Long Term Rating; Affirmed; AAAsf; RO:Sta ----B AU300INTA040; Long Term Rating; Affirmed; Bsf; RO:Sta Interstar Millennium Series 2005-2L Trust ----Class A1 46071TAA1; Long Term Rating; Affirmed; AAAsf; RO:Sta ----Class A2 AU300INTC012; Long Term Rating; Affirmed; AAAsf; RO:Sta ----Class AB AU300INTC020; Long Term Rating; Affirmed; Asf; RO:Sta ----Class B AU300INTC038; Long Term Rating; Affirmed; Bsf; RO:Sta Interstar Millennium Series 2005-3E Trust ----Class AB AU300INTD010; Long Term Rating; Affirmed; AAAsf; RO:Sta ----Class B AU300INTD028; Long Term Rating; Affirmed; Bsf; RO:Sta Interstar Millennium Series 2006-1 Trust ----Class A AU300INTE018; Long Term Rating; Affirmed; AAsf; RO:Sta ----Class AB AU300INTE026; Long Term Rating; Affirmed; BBBsf; RO:Sta ----Class B AU300INTE034; Long Term Rating; Affirmed; Bsf; RO:Sta Interstar Millennium Series 2006-2G Trust ----Class A1 USQ49677AA73; Long Term Rating; Affirmed; AAsf; RO:Sta ----Class A2 USQ49677AB56; Long Term Rating; Affirmed; AAsf; RO:Sta ----Class AB AU0000INBHC6; Long Term Rating; Affirmed; BBBsf; RO:Sta ----Class B AU0000INBHD4; Long Term Rating; Affirmed; Bsf; RO:Sta Interstar Millennium Series 2006-3L Trust ----Class A2 AU0000INNHB3; Long Term Rating; Affirmed; AAAsf; RO:Sta ----Class AB AU0000INNHC1; Long Term Rating; Affirmed; Asf; RO:Sta ----Class B AU0000INNHD9; Long Term Rating; Affirmed; Bsf; RO:Sta Interstar Millennium Series 2006-4H Trust ----A2 AU3FN0000816; Long Term Rating; Affirmed; Asf; RO:Sta ----AB AU3FN0000824; Long Term Rating; Affirmed; BBsf; RO:Sta ----B AU3FN0000832; Long Term Rating; Affirmed; Bsf; RO:Sta Challenger Millennium Series 2007-1E ----Class AB XS0280787226; Long Term Rating; Affirmed; AAAsf; RO:Sta ----Class B XS0280788976; Long Term Rating; Affirmed; Bsf; RO:Sta Challenger Millennium Series 2007-2L ----Class A AU0000CHUHA5; Long Term Rating; Affirmed; AAAsf; RO:Sta ----Class AB AU0000CHUHB3; Long Term Rating; Affirmed; Asf; RO:Sta ----Class B AU0000CHUHC1; Long Term Rating; Affirmed; Bsf; RO:Sta KEY RATING DRIVERS Operational Risk: Advantedge Financial Services Pty Ltd (Advantedge) is the servicer for these transactions. Advantedge is part of the National Australia Bank Group and has extensive experience in servicing and managing its mortgage portfolio, mitigating the transactions' operational risk. Advantedge's collection timelines, policies and procedures relating to mortgage collection are largely in line with those of other Australian conforming mortgage lenders. Asset Analysis: The asset model was not re-run for all the transactions, in accordance with Fitch's criteria, as the notes are rated at the highest possible level (AAAsf or non-model rated cap), asset composition and performance have not deteriorated materially since the last asset model analysis, and there have been no material changes to asset assumptions since the last asset model analysis. As of 30 November 2019, 30+ days arrears for all transactions were above the 3Q19 Dinkum RMBS Index of 1.07%. Arrears for the transactions, as a percentage, tend to be volatile due to the small size of the pools, but arrears balances have remained stable over the past year. 30+ days arrears ranged from 5.0% (Interstar Millennium Series 2005-3E Trust) to 12.5% (Interstar Millennium Series 2005-2L Trust). High arrears have not translated to high level of losses. Losses have remained low for the transactions ranging from 0.42% (Interstar Millennium Series 2006-1 Trust) to 1.96% (Interstar Millenium Series 2006-4H Trust). All loans in the underlying portfolios have 100% lenders' mortgage insurance (LMI) in place, provided mainly by QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength (IFS) Rating: A+/Stable) and Genworth Financial (NYSE:GNW) Mortgage Insurance Pty Limited (IFS Rating: A+/Negative). All losses are covered by LMI or excess spread.
Liability Analysis: Cash flow analysis was not performed for all transactions as all rated notes are rated at the highest possible level (AAAsf or non-model rated cap), cash flow distributions have been within Fitch's expectations and there have been no material changes to cash flow assumptions since the last cash flow model analysis. There have been no changes to foreign-exchange swap margins or applicable foreign-exchange stresses and no significant changes to transaction structures or asset performance since the May 2016 cash flow assessment. Therefore, a full assessment of transaction cash flows was not completed on any of the reviewed transactions. Challenger Millennium Series 2007-1E , Interstar Millennium Series 2005-2L Trust and Interstar Millennium Series 2006-2G Trust are exposed to foreign-currency risk in the event that the Euribor or US dollar Libor turns negative and these trusts have to make additional payments to the currency-swap provider in the relevant foreign currency. Excess spread is likely to be sufficient to cover any payments due by these trusts. Macroeconomic Factors: Fitch expects stable mortgage performance, supported by sustained economic expansion in Australia, with a GDP growth forecast of 2.3% for 2020, a steady labour market and a low interest-rate environment. RATING SENSITIVITIES Fitch does not expect the ratings to be affected by any foreseeable change in performance. The prospect of downgrade is remote, given the level of subordination to all rated notes, pool performance and adequate excess spread. 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 has not reviewed the results of any third-party assessment of the asset portfolio as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the initial underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions 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. 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: issuer and servicer reports as of the November payment date and provided by Advantedge; loan enforcement details as of the November payment date and provided by Advantedge; and discussions and updates from Advantedge in January 2020. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. ESG Considerations The highest level of ESG credit relevance is a score of 3 for transactions listed below - ESG issues are credit neutral or have only a minimal credit impact on the transactions, either due to their nature or the way in which they are being managed. Challenger Millennium Series 2007-1E Interstar Millennium Series 2004-5 Trust Interstar Millennium Series 2005-3E Trust Six transactions listed below have an ESG Relevance Score of 5 for Transaction Collateral Structure due to tail risk identified for tranches resulting from lower-than-expected credit enhancement build-up caused by less stringent pro rata amortisation conditions, which has a negative impact on the credit profile, and is highly relevant to the ratings, resulting in a rating constraint. Challenger Millennium Series 2007-2L Interstar Millennium Series 2005-2L Trust Interstar Millennium Series 2006-1 Trust Interstar Millennium Series 2006-2G Trust Interstar Millennium Series 2006-3L Trust Interstar Millennium Series 2006-4H Trust For more information on our ESG Relevance Scores, visit www.fitchratings.com/esg. Contacts: Surveillance Rating Analyst Sambit Agasti, Associate Director +61 2 8256 0337 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Committee Chairperson Chris Stankovski, Senior Director +61 2 8256 0341
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. 04 Jun 2019) https://www.fitchratings.com/site/re/10076316 Global Structured Finance Rating Criteria (pub. 02 May 2019) https://www.fitchratings.com/site/re/10073280 RMBS Lenders' Mortgage Insurance Rating Criteria (pub. 17 Mar 2019) https://www.fitchratings.com/site/re/10066008 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 29 Jan 2020) https://www.fitchratings.com/site/re/10108544 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 29 Jan 2020) https://www.fitchratings.com/site/re/10108546 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10109085 Solicitation Status https://www.fitchratings.com/site/pr/10109085#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2020 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO's credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see https://www.fitchratings.com/site/regulatory), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.