(The following statement was released by the rating agency)SYDNEY, July 27 (Fitch)
Structured finance (SF) transactions in Australia and New Zealand remained largely stable in 2Q16, with 108 tranches from 44 transactions affirmed, says Fitch Ratings. Four tranches from four transactions were upgraded, following continued strong asset and structural performance. Ten tranches from six transactions were downgraded reflecting increasing exposure to concentration risk.
The Class E note from Flexi ABS Trust 2013-1, an equipment ABS transaction, was placed on Rating Watch Negative (RWN) following a dispute between the issuer and one of the main vendors in the transaction.The four upgrades were from four Australian prime residential mortgage-backed securities (RMBS): PUMA Masterfund S-13 , PUMA Series 2015-1, PUMA Series 2015-3, and TORRENS Series 2014-2 Trust.
The one notch upgrades reflected the continuing strong performance of the underlying assets and the build-up of credit enhancement.The 10 downgraded tranches were from six Interstar and Challenger transactions.
The rating actions reflected the pro rata pay structure through the remaining life of the transactions. This leaves the downgraded notes exposed to tail risk as the transactions get smaller.
The Class E of Flexi ABS Trust 2013-1was placed on RWN in April 2016 following disputed payments between Flexirent Capital Pty Ltd and one of the main vendors in the transaction. Fitch now expects the issue to be resolved by end-September 2016. Australia and New Zealand's stable economic environment over the last two years is reflected in the strong asset performance.
The housing markets in both Australia and New Zealand have enjoyed significant house price appreciation over the last 12-24 months despite signs of a general growth slowdown. The decreasing target cash rate in Australia and the stable official cash rate in New Zealand have helped borrowers service their debt. Moreover, Fitch does not expect rates rises in the either country in the next three months.Australian prime RMBS ratings accounted for most of the affirmations (74), followed by Australian unsecured consumer loans ABS (10), Australian equipment ABS (9), New Zealand auto ABS (6), Australian reverse mortgage RMBS (6), Australian non-conforming RMBS (2), and Australian auto ABS (1).
At the end of 2Q16, the Outlooks on most of the publicly rated notes were Stable, with the exception being the Class E of Flexi ABS Trust 2013-1, which was on RWN.The transactions reviewed during 2Q16 made up approximately 23% of the Fitch publicly rated Australian and New Zealand SF transactions outstanding at end-1Q16.
Individual commentaries relating to specific rating actions can be found on Fitch's website at www.fitchratings.com Contacts:James Zanesi Director+61 2 8256 0306Fitch Australia Pty Ltd.Level 15, 77 King St, Sydney, NSW 2000 Alison Ho Senior Director+852 2263 9937Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available at www.fitchratings.com
Related Research:Fitch: APAC SF Ratings Mostly Stable in 2Q16; 10 Downgrades, 6 Upgrades, published 27July 2016Fitch: Japanese SF and SC Tranches Stable in 2Q16; 6 Affirmations and 1 Upgrade, published 27July 2016
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