Fitch Affirms FP Turbo Trust Series 2019-1; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Sydney-03 December 2020: Fitch Ratings has affirmed one asset-backed floating-rate note from FP Turbo Series 2019-1 Trust. The issuance consists of notes backed by a pool of first-ranking Australian passenger-vehicle and light and heavy commercial-vehicle operating, finance and novated leases originated by Fleet Partners Pty Limited. The notes were issued by Perpetual Trustee Company Limited as trustee for FP Turbo Series 2019-1. The social and market disruptions caused by the coronavirus and the related containment measures did not negatively affect the ratings, because there is sufficient credit enhancement to offset the effects under Fitch's base-case scenario and adequate liquidity to support the current ratings. The Stable Outlook is based on the notes' liquidity support and ability to withstand the sensitivity to higher defaults and lower recoveries stemming from the pandemic. FP Turbo Series 2019-1 Trust ----A2 AU3FN0051827; Long Term Rating; Affirmed; AAAsf; Rating Outlook Stable KEY RATING DRIVERS Credit Enhancement Growth Offsets Pandemic-Adjusted Base-Case Expectations: To account for Fitch's baseline scenario of the pandemic, Fitch considered the performance of the portfolio in reviewing the base-case assumptions, as well as the performance of UK SME transactions during the global financial crisis and FleetPartners' response to the crisis. An increase of 1.45% was applied to the default rate at each rating level, which resulted in an increase for the 'AAAsf' default rate to 24.6% from 23.1%. The base case recovery rates were reduced by 0.86x as a result, while Fitch also adjusted its rating haircuts to reflect Fitch's through-the-cycle approach and to account for the fact that its base cases incorporate an additional element of economic stress. As of end-September 2020, 30+ day arrears for the trust were 0.4% compared with the 3Q20 Dinkum ABS Index 30+ day arrears of 2.0%. The arrears percentage also excludes FleetPartners' reported COVID-19 approved hardship loans, which make up 0.2% of the portfolio, for the same period. There have been no losses in the trust since closing. Commentary describing Fitch's credit views and analytical approach as a consequence of the coronavirus is available in the following reports: - "Global Economic Outlook - September 2020", published on 7 September 2020, available at https://www.fitchratings.com/site/re/10135033; - "Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases - Update", published on 8 September 2020, available at https://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 Residual Value Risk Remains Sufficiently Mitigated: Fitch observed that FleetPartners' sales proceeds as a percentage of a vehicle's documented residual value, excluding end-of-lease income and vehicle disposal costs, was 113% in September 2020, which reflects the current strength of the second-hand car market. The used-car market is benefiting from a combination of a change in consumer preferences away from public transport and reduced supply in the market. Limited Liquidity Risk from Payment Holidays: We have reviewed the ability of the transaction to withstand a significant proportion of borrowers being offered and taking up payment holidays, despite the relatively low take-up compared with other auto-lenders. The transaction benefits from a liquidity reserve sized at 2.0% of aggregate invested note balance. The transaction can withstand over 75% of the portfolio being granted a payment holiday for six months, which is well above the 0.1% of receivables under payment holiday arrangements currently, before needing to draw on the reserves. Low Operational and Servicing Risk: All receivables were originated by FleetPartners. Fitch undertook an operational review and found that the operations of the servicer were consistent with market standards for auto and equipment lenders. The pandemic has not disrupted collection or servicing activity, as staff are able to work remotely and have access to the office, if needed. Economic Rebound in Medium Term Supports Rating 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%, but the effects on loan performance will be partly offset by a low cash rate of 0.10% and the application of central bank and government stimulus measures. Fitch expects GDP growth to bounce back to 3.9% in 2021 and for the unemployment rate to fall to 6.7%. 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 the transaction were discussed in the last rating action commentary "Fitch Assigns Final Ratings to FP Turbo Series 2019-1" at https://www.fitchratings.com/site/pr/10104602. 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 class A2 notes have subordination that is at least 1.2x greater than the 'AAAsf' baseline portfolio loss and can absorb Fitch's downside scenario of the coronavirus-related impact. 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 transactions. There were no findings that were material to this analysis. Prior to the transaction closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was available to the agency. As part of its ongoing monitoring, Fitch reviewed a small targeted sample of FleetPartners' origination files and found the information contained in the 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. 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 Marija Buzevska, Senior Analyst +61 2 8256 0340 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 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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