Fitch Assigns Ratings to Australian Sales Finance and Credit Cards Trust

(The following statement was released by the rating agency)SYDNEY, November 24 (Fitch) Fitch Ratings has assigned ratings to Australian Sales Finance and Credit Cards Trust's floating debt, backed by Australian consumer receivables. The receivables are originated by Latitude Finance Australia - the renamed GE Consumer Finance business that has been acquired by a consortium comprising KKR, Varde Partners and Deutsche Bank AG (DE:DBKGn) (KVD). The ratings are as follows:AUD3,100.0m Class A debt: 'Asf'; Outlook Stable;AUD157.5m Class B debt: 'BBBsf'; Outlook Stable;AUD241.7m Class C debt: 'BBsf'; Outlook Stable; andAUD264.9m Class D debt: not rated.The classes of debt are issued by Perpetual Corporate Trust Limited in its capacity as trustee of the Australian Sales Finance and Credit Cards Trust. The transaction established a revolving, asset backed debt programme that features a multi class structure that will purchase receivables from the seller on a revolving basis. If the revolving period is not extended or the debt not otherwise voluntarily repaid in full at the end of the revolving period, that series will enter a controlled amortisation period, during which one twenty fourth of the face value of that series will be repaid on each payment date following the end of the revolving period.To protect the debt holders from deterioration in the credit quality of the portfolio, the transaction features performance triggers that either require rectification or may cause a rapid amortisation event in which all collections will be used to pay down the debt in sequential order.At the cut-off date, the collateral pool consisted of approximately AUD3.3 billion of consumer receivables, comprising 1.8 million active accounts with an average balance outstanding of approximately AUD1,800. The receivables were originated by GE's Australian consumer finance business which has now been sold to KVD. The revolving receivables pool is subject to eligibility criteria and portfolio parameters.KEY RATING DRIVERS Base Case Reflects Performance: Fitch has analysed the originator's historical performance for key portfolio metrics, yield, charge-offs and monthly payment rates. Base cases have been set for each of these metrics to permit analysis of the overall receivables portfolio.Sufficient Credit Enhancement: All classes of debt benefit from sufficient subordination and a liquidity facility provided by National Australia Bank Limited.Performance Triggers Provide Protection: The transaction benefits from several performance triggers that, if breached can potentially lead to rapid amortisation of the transaction to prevent exposure to further deterioration in asset performance.Tax Neutrality: This trust, unlike other Australian securitisation trusts, is not tax neutral due to withholding tax on distribution to offshore unitholders. The overall amount of tax is relatively small and structural features help to mitigate this risk.Originator and Servicer: While the business has experienced a change of ownership the existing operational management and staff have been managing the consumer receivables for over a decade. Fitch conducted a review of the underwriting and servicing capabilities in May 2015 and found their capabilities satisfactory.RATING SENSITIVITIES Fitch has modelled three different scenarios when evaluating the rating sensitivity compared to the expected performance for the trust: 1) increased charge-offs; 2) a reduction in the yield, and 3) a reduction in the monthly payment rate. The rating sensitivity indicates sensitivity to an increase in defaults and a reduction in monthly payment rates, with less sensitivity to yield reduction. The Class C debt is significantly more sensitive to changes in performance than other classes of debt.DUE DILIGENCE USAGENo third party due diligence was provided or reviewed in relation to this rating action.DATA ADEQUACYFitch reviewed the results of the agreed-upon procedures (AUP) conducted on the portfolio. The AUP reported no material errors that would impact Fitch's rating analysis.Contacts: Primary AnalystDavid CarrollDirector+61 2 8256 0333Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney NSW 2000Secondary AnalystJames LeungDirector+61 2 8256 0322Committee ChairpersonNatasha VojvodicSenior Director+61 2 8256 0350Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available at www.fitchratings.com.The source of information identified for this rating action was Deutsche Bank AG, as arranger and the issuer's counsel Herbert Smith Freehills. 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=744175Global Credit Card ABS Rating Criteria (pub. 26 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867482Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=995319Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=995319Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. 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.