(The following statement was released by the rating agency) Fitch Ratings-Sydney-November 08: Fitch Ratings has affirmed two classes of asset-backed floating-rate notes from the Latitude Australia Personal Loans Series 2017-1 Trust. The transaction is a securitisation of predominantly unsecured Australian personal loan receivables originated by Latitude Personal Finance Pty Ltd. The rating action is as follows: AUD397.8 million Class A notes (ISIN AU3FN0039178) affirmed at 'AAAsf'; Outlook Stable AUD67.2 million Class B notes (ISIN AU3FN0039186) affirmed at 'AAsf'; Outlook Stable KEY RATING DRIVERS Obligor Default Risk: Obligor default and recovery rates are a key assumption in Fitch's quantitative analysis. Performance of the underlying assets has been in line with Fitch's base-case expectations and initially modelled scenarios. At end-September 2018, 30+ day arrears were 2.6%, higher than Fitch's Australian 2Q18 Dinkum ABS Index of 1.7%. The higher arrears were in line with the unsecured nature of the receivables. Gross and net losses were 3.7% and 3.0%, respectively, in line with initially modelled base cases. Cash Flow Dynamics: Fitch did not model the transaction cash flows for this review as there have been no changes to the base-case assumptions made at closing, the transaction has performed within expectations set at closing; the transaction is still within the revolving period and there has been no amortisation of the notes; the portfolio has remained well within pool parameters and has not breached any transaction covenants set at closing. In the initial cash flow analysis, Fitch tested a stressed portfolio, which was migrated towards the portfolio parameters. Structural Risks: The transaction is currently within its revolving period during which substitutions can take place. Parameters are in place to manage concentrations in the pool such as maximum allowable proportions of each borrower risk grade and minimum portfolio yield. There have been no breaches to any parameters since transaction closing. Servicer, Operational Risks: All assets were originated by Latitude Personal Finance Pty Ltd, which demonstrates adequate capabilities as originator, underwriter and servicer, as evident from the historical delinquency and loss performance of existing securitised trusts. Latitude Personal Finance Pty Ltd is a part of the Latitude Financial Services group. Fitch undertook an onsite operational review and found that the operations of the originator and servicer were of an acceptable standard. Residual Value Risks: There is no residual value risk as there are no residual value positions or balloon payments in the portfolio. 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 and pool performance. The rating of the transaction may be affected under a significant stress that may cause large defaults. This event is unlikely and Fitch does not anticipate such an event will occur in the near future given expectations that the Australian economy will continue to be stable.
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 pool and the transaction. 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. As part of its ongoing monitoring, Fitch conducted a file review of a small targeted sample of Latitude Personal Finance'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. VARIATIONS FROM CRITERIA Fitch's Consumer ABS Rating Criteria limits recovery stress haircuts to 60% at the 'AAAsf' rating level and 48% at the 'AAsf' rating level. Latitude Personal Finance's observed personal loan recoveries have been low and we expect them to be lower in a high-stress environment. We have applied a recovery haircut of 100% to any recoveries at investment-grade ratings (BBBsf and above) in the rating analysis. This is consistent with the initial analysis of the Latitude Australia Personal Loans Series 2017-1 transaction and there is no impact on the rating. SOURCES OF INFORMATION The information below was used in the analysis: Transaction reporting data provided by KVD TM Pty Ltd (the trust manager) as at end-September 2018 The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Lead Surveillance Analyst Marija Buzevska Analyst +612 8256 0340 Fitch Australia Pty Ltd Level 15, 77 King Street Sydney NSW 2000 Committee Chairperson Claire Heaton Senior Director +612 8256 0361 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 Consumer ABS Rating Criteria (pub. 11 Dec 2017) https://www.fitchratings.com/site/re/907089 Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018863 Global Structured Finance Rating Criteria (pub. 15 May 2018) https://www.fitchratings.com/site/re/10029600 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 Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018549 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10051308 Solicitation Status https://www.fitchratings.com/site/pr/10051308#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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