(The following statement was released by the rating agency) Link to Fitch Ratings' Report(s): Flexi ABS Trust 2018-1 - Appendix https://www.fitchratings.com/site/re/10028638 Flexi ABS Trust 2018-1 https://www.fitchratings.com/site/re/10028064 Fitch Ratings-Sydney-April 30: Fitch Ratings has assigned expected ratings to Flexi ABS Trust 2018-1's asset-backed floating-rate notes. The issuance consists of notes backed by small-balance unsecured consumer loans originated by Certegy Ezi-Pay Pty Ltd (Certegy) whose ultimate parent is FlexiGroup Limited (FlexiGroup). The ratings are as follows: AUD100.0 million class A1 notes: 'F1+(EXP)sf'; AUD66.5 million class A2 notes: 'AAA(EXP)sf'; Outlook Stable; AUD66.0 million class A2-G notes: 'AAA(EXP)sf'; Outlook Stable; AUD15.3 million class B-G notes: 'AA(EXP)sf'; Outlook Stable; AUD17.7 million class C notes: 'A(EXP)sf'; Outlook Stable; AUD12.0 million class D notes: BBB(EXP)sf'; Outlook Stable; AUD7.5 million class E notes: BB+(EXP)sf'; Outlook Stable; and AUD15.0 million class F notes: 'NR(EXP)sf' The notes will be issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2018-1. At the cut-off date at 23 April 2018, the total collateral pool consisted of 141,527 individual consumer loan contracts totalling AUD295.7 million. The receivables are retail point-of-sale, interest-free consumer-finance loans used to finance a wide variety of products. These include solar equipment (40.0%); jewellery (16.8%); roofing, shutters and guttering (7.1%); and other homeowner products. Homeowners make up 55.3% of borrowers, and 49.1% are repeat Certegy customers. KEY RATING DRIVERS Obligor Default Risk: The portfolio consists of receivables originated from a geographically diversified pool of Australian retail customers across solar, jewellery, home items, other items and fitness equipment. Fitch has assigned a weighted-average base-case gross loss rate of 4.6%, based on the portfolio composition. The average contract size is small at AUD2,090, while the weighted average (WA) remaining term is 24.9 months. Cash Flow Dynamics: The ratings on all notes are supported by credit enhancement from the junior notes as well as by soft credit support (excess spread). Structural Risks: A liquidity reserve, funded by proceeds from issuance, will ensure stable cash flows for all rated notes and trust expenses. The transaction includes a fixed-rate swap with notional based on a fixed schedule and a derivative reserve account, which will be established to set aside excess income, to ensure sufficient cash flow is available to cover future swap payments to the extent the deal is overhedged. Counterparty Risks: The transaction includes structural mechanisms that ensure remedial actions take place in the event the swap provider or trust account bank fall below certain ratings. Servicer, Operational Risks: Certegy is a wholly owned subsidiary of FlexiGroup Limited, a provider of retail point-of-sale consumer finance. Certegy provides interest-free consumer loans and cheque guarantee products in Australia. Delinquencies greater than 30 days on Certegy's retail portfolio have historically tracked below 3.0%. The nominated back-up servicer is Dun & Bradstreet (NYSE:DNB), which already has access to Certegy's systems and can step in immediately in the event of servicer termination. Residual Value Risk: All securitised loans are structured so that there is no exposure to residual value risk, with the borrower liable for such risks at all times. EXPECTED RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in credit enhancement (CE) and remaining loss-coverage levels available to the notes. Decreased CE may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis by stressing a transaction's initial base-case assumptions. The agency's analysis found that the expected ratings assigned to the class A2 and A2-G (the A2 notes), B-G, C and D notes were sensitive to Fitch's mild default stress in which the base case default rate increased by 10%. The ratings on these notes declined by one notch from the expected ratings assigned to each of these classes. Under Fitch's medium (25% increase) default stress, the ratings on the class A2 notes migrated further to 'AA-sf, while the ratings of the class B-G, C, D and E notes declined to 'Asf', 'BBB+sf', 'BB+sf' and 'BB-sf', respectively. Under Fitch's severe default stress scenario, in which the base case default rate increased by 50%, the ratings on the class A1 and A2 notes deteriorated to 'F1sf' and 'A+sf', respectively, while the ratings of the class B-G, C, D and E notes declined to 'A-sf', 'BBB-sf', 'BBsf' and 'B+sf', respectively. Key Rating Drivers and Expected Rating Sensitivities are further discussed in the corresponding presale report entitled "Flexi ABS Trust 2018-1", published today. 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. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016. DATA ADEQUACY Prior to the transaction closing, Fitch sought to receive a third party assessment conducted on the asset portfolio information, but none was available for this transaction.
Fitch conducted a review of a small targeted sample of FlexiGroup'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 FlexiGroup as of 23 April 2018 Certegy arrears provided by FlexiGroup as of February 2018 Historical static loss data provided by FlexiGroup as of February 2018 Transaction documentation provided by King & Wood Mallesons, the issuer's counsel. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst James Leung Director +612 8256 0322 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney, NSW 2000 Secondary Analyst Simon Sive Analyst +612 8256 0379 Committee Chairperson Claire Heaton Senior Director +612 8256 0361 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.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. 03 May 2017) https://www.fitchratings.com/site/re/897411 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) https://www.fitchratings.com/site/re/898537 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 23 May 2017) https://www.fitchratings.com/site/re/898538 Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018549 Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions https://www.fitchratings.com/site/re/882358 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10028063 Solicitation Status https://www.fitchratings.com/site/pr/10028063#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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