(The following statement was released by the rating agency) Fitch Ratings-Sydney-November 27: Fitch Ratings has assigned final ratings to Flexi ABS Trust 2019-2's asset-backed floating-rate notes. The issuance consists of notes backed by a pool of first-ranking Australian unsecured consumer receivables, branded as 'humm', and originated by Certegy Ezi-Pay Pty Ltd (the originator), a wholly owned subsidiary of FlexiGroup Limited (flexigroup). The notes have been issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2019-2 (the issuer). Flexi ABS Trust 2019-2 ----A1 AU3FN0051660; Long Term Rating; New Rating; AAAsf; RO:Sta ----A1-G AU3FN0051678; Long Term Rating; New Rating; AAAsf; RO:Sta ----B-G AU3FN0051686; Long Term Rating; New Rating; AA+sf; RO:Sta ----C-G AU3FN0051694; Long Term Rating; New Rating; Asf; RO:Sta ----D-G AU3FN0051702; Long Term Rating; New Rating; BBBsf; RO:Sta ----E-G AU3FN0051710; Long Term Rating; New Rating; BB+sf; RO:Sta ----F ; Long Term Rating; New Rating; NRsf Transaction Summary The transaction has been upsized to AUD265 million, from AUD245 million, since the expected ratings were assigned on 29 October 2019. The increased pool consists of 93,793 receivables with an average balance of AUD2,825 at the 30 October 2019 cut-off date. The receivables are retail point-of-sale, buy-now-pay-later consumer-finance loans used to finance a wide variety of products, such as solar equipment (47.9% of the portfolio), home items (16.3%), jewellery (10.5%) and other items. KEY RATING DRIVERS Obligor Default Risk: Default rates have been stable since 2015, despite falling weighted-average (WA) customer-deposit rates. A greater proportion of Certegy's originations are from repeat customers with a demonstrated performance history. We assumed a WA default rate of 5.0% based on the sound performance of Certegy's portfolio and previous transactions and a WA default multiple of 5.0x for 'AAAsf', which reflects the default data of a benign economic period, the data's relative volatility and a higher default base case for jewellery and other items. Fitch expects stable asset performance, supported by sustained economic growth in Australia. We forecast GDP growth of 2.3% in 2020, a stable labour market and low interest rates to support the Outlook of the rated notes. Cash Flow Dynamics: Fitch completed full cash-flow modelling and determined that full and timely payment of principal and interest was made in all rating scenarios. Structural Risk: A liquidity facility is available to ensure stable cash flow for classes A1 to E-G notes as well as trust expenses. The transaction includes fixed-rate swaps with notionals based on fixed schedules and derivative reserve accounts to trap excess spread to the extent that voluntary prepayments and defaults cause the transaction to be overhedged. Counterparty Risk: The transaction includes structural mechanisms to ensure remedial action takes place if the ratings of the swap providers or trust account bank fall below a certain level. Servicer, Operational Risks: Fitch reviewed the originator's underwriting and the servicer's capabilities and found that the operations of the originator and servicer were comparable with those of other consumer-finance lenders. Flexirent Capital Pty Ltd (servicer) is not rated and servicer disruption risk is mitigated via back-up arrangements. The nominated back-up servicer is illion Australia Pty Ltd, which has live access to the servicer's systems and can step in immediately upon servicer termination. Residual Value Risks: Residual value risk is not a driver for this transaction as each receivable is contracted to amortise to a zero balance at its respective maturity date. 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 is 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. Class: A1/A1-G/B-G/C-G/D-G/E-G Expected Rating: AAAsf/AAAsf/AA+sf/Asf/BBBsf/BB+sf Expected impact on expected rating of increased defaults: Increase defaults by 10%: AAAsf/AAAsf/AAsf/Asf/BBB-sf/BB+sf Increase defaults by 25%: AAAsf/AAAsf/AA-sf/BBB+sf/BB+sf/BBsf Increase defaults by 50%: AAsf/AAsf/Asf/BBBsf/BBsf/BB-sf 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 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. As a part of its ongoing monitoring, Fitch conducted a review of a small targeted sample of the originator's 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: - historical static loss data provided by flexigroup as of August 2019; - loan-by-loan data provided by flexigroup at 30 October 2019; and - transaction documentation provided by Clayton Utz, 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. 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 clicking the link to the Appendix. 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'. ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3. ESG issues are credit neutral or have only a minimal credit impact on the transaction, either due to their nature or the way in which they are being managed by the transaction. For more information on our ESG Relevance Scores, visit www.fitchratings.com/site/esg Contacts: Primary Rating Analyst James Leung, Director +61 2 8256 0322 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Secondary Rating Analyst Marija Buzevska, Senior Analyst +61 2 8256 0340 Surveillance Rating Analyst Marija Buzevska, Senior Analyst +61 2 8256 0340 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Committee Chairperson Natasha Vojvodic, Senior Director +61 2 8256 0350
Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com; Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Consumer ABS Rating Criteria (pub. 29 Jan 2019) https://www.fitchratings.com/site/re/10060611 Fitch Ratings Interest Rate Stress Assumptions for Structured Finance and Covered Bonds (Excel) (pub. 28 Oct 2019) https://www.fitchratings.com/site/re/10098460 Global Structured Finance Rating Criteria (pub. 02 May 2019) https://www.fitchratings.com/site/re/10073280 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 18 Apr 2019) https://www.fitchratings.com/site/re/10068780 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 18 Apr 2019) https://www.fitchratings.com/site/re/10069072 Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 28 Oct 2019) https://www.fitchratings.com/site/re/10095115 Related Research Flexi ABS Trust 2019-2 - Appendix https://www.fitchratings.com/site/re/10092324 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10103453 Solicitation Status https://www.fitchratings.com/site/pr/10103453#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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