Fitch Upgrades 1, Downgrades 1, Affirms 17 Australian RMBS Tranches On Amended Criteria

(The following statement was released by the rating agency)SYDNEY, September 01 (Fitch) Fitch Ratings has upgraded the class B notes of APOLLO Series 2009-1 Trust, downgraded the class B notes of Light Trust No.2, and affirmed 17 Australian prime RMBS tranches. The rating actions follow the recent amendment to the APAC Residential Mortgage Criteria. The amendment reflects Fitch's methodology for assessing the rating of existing notes that have no subordination. A full list of rating actions is at the end of this commentary.KEY RATING DRIVERSThe ratings of junior notes with no subordination benefit from lenders' mortgage insurance (LMI) and excess spread. In assessing the ratings on such notes, Fitch takes into account a transaction's historical performance, loan seasoning, remaining transaction size, availability of excess income, the sponsor's rating and its history of calling previous transactions.The affirmations of two tranches at 'BBBsf' and the upgrade of the class B notes from APOLLO Series 2009-1 Trust to 'BBBsf' from 'BBsf', reflect Fitch's view that the credit quality and performance of the loans in the collateral pools have remained in line with expectations. The LMI providers continue to pay a significant portion of the submitted claims and the sponsors continue to cover for shortfalls due to breaches of representations and warranties. Fitch expects the transactions to be large in size at call and have annualised excess spread of at least 0.5%. Net excess spread is expected to be adequate and stable for the remaining life of the transactions and to be sufficient to cover principal shortfalls from LMI reductions or denials. Fitch also expects the sponsors, which are rated at least 'BBB', to call the transactions in a 'BBBsf' scenario. The notes can withstand deterioration of economic conditions in line with the agency's expectations.The affirmations of three tranches at 'BBsf' reflect Fitch's view that the credit quality and performance of the loans in the collateral pools have remained in line with expectations. The LMI providers continue to pay a significant portion of the submitted claims and the sponsors continue to cover for shortfalls due to breaches of representations and warranties. Net excess spread is likely to be sufficient to cover for shortfalls from LMI reductions or denials. Fitch also expects the sponsors to call the transactions in a 'BBsf' scenario. The notes can withstand deterioration of economic conditions in line with the agency's expectations.The affirmations of 12 tranches at 'Bsf' reflect Fitch's view that the sponsors will not call the transactions, with the junior notes being exposed to tail risk and volatility in the current economic environment. The credit quality and performance of the loans in the collateral pools have remained in line with expectations. Default risk is present, but a limited safety margin remains. Fitch expects net excess spread will be sufficient to cover principal shortfalls and for the notes to be fully repaid. The downgrade of class B from Light Trust No. 2 to 'Bsf' from 'BBsf' reflects Fitch's view that net excess spread has been low relative to other notes rated 'BBsf', thus providing a limited safety margin. The default model was not re-run for any of these rating actions as the outstanding ratings are either only 'AAAsf' and/or a rated junior note is present with no subordination.RATING SENSITIVITIESNotes that have no subordination and are rated 'BBBsf' or 'BBsf' may be downgraded if there is a deterioration in performance with losses being above expectations, a significant reduction in payment of LMI claims and/or a significant reduction in excess spread. These notes may also be downgraded in the event that Fitch no longer expects the issuer to call the transaction. Notes that have no subordination and are rated 'Bsf' may be downgraded if the possibility of the notes defaulting exists because of losses being above expectations, a significant reduction in payment of LMI claims and/or a significant reduction in excess spread. None of the notes listed are likely to be upgraded.USE OF THIRD PARTY DUE DILIGENCE PERSUANT 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 ADEQUACYFitch conducted a file review of at least 10 sample loan files in each of the transactions listed below with the exception of AIMS 2004-1 Trust, AIMS 2005-1 Trust, and AIMS 2007-1 Trust, focusing on the underwriting procedures conducted by originators of the transactions compared to their 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.The full list of rating actions is shown below:AIMS 2004-1 Trust AUD15.3m Class B (ISIN AU300AIM2043) affirmed at 'Bsf'; Outlook StableAIMS 2005-1 Trust AUD12.8m Class B (ISIN AU300AIM3025) affirmed at 'Bsf'; Outlook StableAIMS 2007-1 Trust AUD16.3m Class B (ISIN AU3FN0002671) affirmed at 'Bsf'; Outlook StableAPOLLO Series 2009-1 Trust AUD147.8m Class B (ISIN AU3FN0008975) upgraded to 'BBBsf' from 'BBsf'; Outlook StableChallenger Millennium Series 2007-1E EUR32.5m Class B (ISIN XS0280788976) affirmed at 'Bsf'; Outlook StableChallenger Millennium Series 2007-2L AUD5.1m Class B (ISIN AU0000CHUHC1) affirmed at 'Bsf'; Outlook StableCrusade Euro Trust No. 1E of 2007 AUD4.4m Class C (ISIN AU3FN0003158) affirmed at 'BBBsf'; Outlook StableCrusade Global Trust No. 1 of 2007 AUD6.7m Class C (ISIN AU3FN0002036) affirmed at 'BBBsf'; Outlook StableFirstMac Bond Series 1E-2006 Trust AUD50.5m Class B (ISIN AU300FMA9017) affirmed at 'BBsf'; Outlook StableFirstMac Mortgage Funding Trust Series 1-2007 AUD27.0m Class B (ISIN AU3FN0001897) affirmed at 'BBsf'; Outlook StableFirstMac Mortgage Funding Trust Series 1E-2007 AUD9.0m Class B (ISIN AU3FN0003018) affirmed at 'BBsf'; Outlook StableInterstar Millennium Series 2004-5 Trust AUD11.3m Class B (ISIN AU300INTA040) affirmed at 'Bsf'; Outlook StableInterstar Millennium Series 2005-2L Trust AUD4.0m Class B (ISIN AU300INTC038) affirmed at 'Bsf'; Outlook StableInterstar Millennium Series 2005-3E Trust AUD44.5m Class B (ISIN AU300INTD028) affirmed at 'Bsf'; Outlook StableInterstar Millennium Series 2006-1 Trust AUD2.6m Class B (ISIN AU300INTE034) affirmed at 'Bsf'; Outlook StableInterstar Millennium Series 2006-2G Trust AUD7.6m Class B (ISIN AU0000INBHD4) affirmed at 'Bsf'; Outlook StableInterstar Millennium Series 2006-3L Trust AUD8.4m Class B (ISIN AU0000INNHD9) affirmed at 'Bsf'; Outlook StableInterstar Millennium Series 2006-4H Trust AUD7.4m Class B (ISIN AU3FN0000832) affirmed at 'Bsf'; Outlook StableLight Trust No. 2 AUD1.6m Class B (ISIN AU3FN0008876) downgraded to 'Bsf' from 'BBsf'; Outlook StableContacts: Lead Surveillance Analyst James ZanesiDirector+61 2 8256 0306Fitch Australia Pty LtdLevel 15, 77 King St, Sydney, NSW 2000, AustraliaCommittee Chairperson Ben McCarthyManaging Director+61 2 8256 0388Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available at www.fitchratings.com.Sources of Information:The sources of information used to assess these ratings were the servicers of the transactions. The issuers of the notes have informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.Applicable Criteria APAC Residential Mortgage Criteria - Amended (pub. 30 Aug 2016)https://www.fitchratings.com/site/re/887076Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)https://www.fitchratings.com/site/re/884963Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016)https://www.fitchratings.com/site/re/884964Global Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 28 Jul 2016)https://www.fitchratings.com/site/re/884107Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/site/re/883130Related Research Representations, 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/site/re/863817Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=1011090Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011090Endorsement 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 PUBLIC WEBSITE '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.