Fitch Places 1 Tranche of Flexi ABS on RWN; Affirms 9 Tranches

(The following statement was released by the rating agency)SYDNEY, April 15 (Fitch) Fitch Ratings has placed one tranche of Flexi ABS Trust 2013-1 (Flexi 2013-1) on Rating Watch Negative (RWN) and at the same time affirmed four tranches of that transaction. Fitch has also affirmed five tranches of Flexi ABS Trust 2015-1 (Flexi 2015-1). The action was taken following a review of the transactions' exposure to a commercial dispute between Flexirent Capital Pty Ltd (Flexi) and one of the vendors in both transactions who acts as an introducer of receivables.The transactions are backed by unsecured commercial lease receivables originated by Flexi. The notes were issued by Perpetual Corporate Trust Limited in its capacity as trustee of the two transactions.The rating actions are as listed below: Flexi ABS Trust 2013-1-AUD10.8m Class A notes (ISIN AU3FN0019444) affirmed at 'AAAsf'; Outlook Stable-AUD2.7m Class B notes (ISIN AU3FN0019451) affirmed at 'AA+sf'; Outlook Stable-AUD4.0m Class C notes (ISIN AU3FN0019469) affirmed at 'AAsf'; Outlook Stable-AUD2.0m Class D notes (ISIN AU3FN0019477) affirmed at 'Asf'; Outlook Stable-AUD1.5m Class E notes (ISIN AU3FN0019485) 'BBBsf' placed on Rating Watch Negative.Flexi ABS Trust 2015-1-AUD87.3m Class A notes (ISIN AU3FN0027256) affirmed at 'AAAsf'; Outlook Stable-AUD9.4m Class B notes (ISIN AU3FN0027264) affirmed at 'AAsf'; Outlook Stable-AUD9.4m Class C notes (ISIN AU3FN0027272) affirmed at 'Asf'; Outlook Stable-AUD4.7m Class D notes (ISIN AU3FN0027280) affirmed at 'BBBsf'; Outlook Stable-AUD6.3m Class E notes (ISIN AU3FN0027298) affirmed at ''BBsf'; Outlook Stable.KEY RATING DRIVERSSince the transactions were last reviewed in April 2015, a commercial dispute has arisen between Flexi and one of the main vendors in both transactions. The dispute relates to the calculations of obligor payments due. The vendor continues to make payments to the trust; however, a substantial portion of the pools are in arrears due to the disputed calculations. Flexi 2013-1, at its small size, is the most exposed to the vendor, which accounts for 20% of remaining assets. At 31 March 2015, its 30+ day arrears are 15.7% and 90+ day arrears are 8%. Flexi 2015-1 has 30+ arrears at 5.3% and 90+ arrears at 1.9%. Removing the impact of these loans on arrears, 30+ arrears are low, at 1.5% and 0.4% for Flexi 2013-1 and Flexi 2015-1 respectively. Losses remain below base cases, at 3.5% for Flexi 2013-1 and 1.4% for Flexi 2015-1. There are currently no charge offs to any of the notes.Flexi has informed Fitch both parties have undertaken to perform a reconciliation of the disputed calculations and are working collaboratively to resolve the issue. Once the reconciliation is completed, the relevant party will make the required payment to the trust. This reconciliation and resolution is expected to be completed by 30 June 2016. Fitch expects to resolve the RWN at the end of this period.RATING SENSITIVITIES Flexi 2013-1 is currently paying sequentially due to the arrears trigger being breached. This is resulting in a significant build-up of subordination. Negative rating action on the Class E Flexi 2013-1 notes will be taken if the dispute is not resolved in the expected time period or if the resolution results in a significant loss to the transaction. In this event, the Class E notes may be downgraded by up to one category. A full loss of the disputed receivables will not impact the ratings of the Class A to D notes, hence they have been affirmed. Flexi 2015-1 is paying pro-rata to all classes except Class F, resulting in a build-up of credit enhancement. If the arrears trigger is breached the transaction will revert to sequential pay. Exposure to the assets is 5% and there is sufficient subordination to protect the notes in the event of total non-payment. As a result, Fitch has affirmed all rate notes for Flexi 2015-1.DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating actionDATA ADEQUACY Fitch conducted a file review of 10 sample loan files, focusing on the underwriting procedures conducted by Flexi compared to its credit policy at the time of underwriting. Fitch checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below.Contacts: Lead Surveillance AnalystKatie BrookesAnalyst+612 82560 364Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney, NSW 2000, AustraliaCommittee 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.comSources of Information:The source of information used to assess these ratings was Flexi. 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 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 2013-1 https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=711321Flexi ABS Trust 2013-1 - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=711323Flexi ABS Trust 2015-1 https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865079Flexi ABS Trust 2015-1 - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865080Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions (Applicable to Transactions Rated from Sept.26, 2011 until June 15, 2015) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863817Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=1002550Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002550Endorsement 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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