Fitch Assigns Final Ratings to Flexi ABS Trust 2016-1

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: Flexi ABS Trust 2016-1https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880574SYDNEY, April 26 (Fitch) Fitch Ratings has assigned final ratings to Flexi ABS Trust 2016-1'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:AUD91m Class A1 notes: 'F1+sf'AUD60.5m Class A2 notes: 'AAAsf'; Outlook StableAUD50m Class A2-G notes: 'AAAsf'; Outlook StableAUD12.48m Class B notes: 'AAsf'; Outlook StableAUD14.82m Class C notes: 'Asf'; Outlook Stable AUD10.4m Class D notes: BBBsf'; Outlook StableAUD7.8m Class E notes: BBsf'; Outlook StableAUD13m Class F notes: 'NRsf'The notes were issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2016-1. At the cut-off date, the total collateral pool consisted of 131,613 individual consumer loan contracts totalling AUD256.2m. The receivables are retail point-of-sale interest-free consumer-finance loans used to finance a wide variety of products including solar equipment (39.0%); jewellery (20.1%); fitness equipment (3.8%); and other products. Homeowner industries make up 51.4% of borrowers and 34.4% are repeat Certegy customers.KEY RATING DRIVERSAvailability of Excess Spread: The transaction yields significant levels of excess spread, which is used to support the ratings of the class B, C, D and E notes; while sufficient credit enhancement, provided by the subordination of junior notes, exists for the class A1, A2 and A2-G notes to be rated independent of any soft credit support (excess spread). Experienced Originator: Certegy is a wholly owned subsidiary of FlexiGroup, a provider of retail point-of-sale consumer finance. Certegy provides "no interest ever" consumer loans, an interest-free product, and cheque guarantee products in Australia. Certegy delivers its products through a network of retailers and service providers. Delinquencies greater than 30 days on Certegy's retail portfolio have historically tracked below 3.0%.Diverse and Granular Portfolio: The portfolio consists of receivables originated to a geographically diversified pool of Australian retail customers across many asset types. The average contract size is AUD1,947, while the weighted average remaining term stands at 22.9 months.Support Features Back Rating: A liquidity reserve, funded by proceeds from issuance, will ensure stable cash flows for all rated notes and trust expenses. A derivative reserve account will be established to set aside voluntary prepayments made by borrowers to ensure sufficient income is available to cover future swap payments.No Residual Value Risk: All securitised loans are structured so there is no exposure to residual value risk, with the borrower liable for such risks at all times.RATING SENSITIVITIESUnexpected increases in the frequency of defaults and the loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, which could result in negative rating actions on the notes. Fitch has evaluated the sensitivity of the ratings assigned to Flexi ABS Trust 2016-1 to increased gross default levels over the life of the transaction.The agency's analysis found that the ratings assigned were not sensitive to Fitch's mild (10% increase) default stress. Under Fitch's moderate (25% increase) stress, the ratings on the class A2 and A2-G notes declined to 'AA+sf', the class B note rating declined to 'A+sf' and the class C note rating declined to 'A-sf'.Under Fitch's severe stress, in which the base case defaults increased by 50%, the ratings on the class A2 and A2-G notes declined to 'AA-sf', while the class B, C and D notes' ratings declined to 'Asf', 'BBBsf' and 'BB+sf', respectively.DUE DILIGENCE USAGENo third party due diligence was provided or reviewed in relation to this rating action.DATA ADEQUACYFitch conducted a file review of 12 sample loan files focusing on the underwriting procedures conducted by Certegy compared to Certegy's credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "Flexi ABS Trust 2016-1", published today. Included as an appendix to the report are a description of the representations, warranties and enforcement mechanisms.Contacts: Primary Analyst Brenden Asplin, CFAAssociate DirectorPhone +612 8256 0340Fitch Australia Pty Ltd.Level 15, 77 King St, Sydney, NSW 2000Secondary Analyst Spencer WilsonAssociate DirectorPhone +612 8256 0320Committee Chairperson Natasha VojvodicSenior DirectorPhone +612 8256 0350Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available at www.fitchratings.comThe sources of information identified for this rating action were FlexiGroup and the issuer's counsel King & Wood Mallesons. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.Applicable Criteria Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds - Derivative Addendum (pub. 14 Apr 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878499Global Consumer ABS Rating Criteria (pub. 03 Dec 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874105Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952Related Research Flexi ABS Trust 2016-1 - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880575Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878450Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=1003362Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003362Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises 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.