MELBOURNE (S&P Global Ratings) Feb. 22, 2024--S&P Global Ratings today raised its rating on the class B notes issued by Perpetual Trustee Co. Ltd. as trustee for Series 2017-1 Harvey Trust. At the same time, we removed the rating from CreditWatch with positive implications, where it was placed on Jan. 24, 2024 (see "Seven Ratings On Six Australian RMBS Transactions Placed On CreditWatch Positive," Jan. 24, 2024).
We also affirmed our ratings on the remaining four classes of notes (see list). The transaction is backed by residential mortgage loans originated and serviced by Great Southern Bank (GSB; a business name of Credit Union Australia Ltd.).
We raised our rating on the class B notes due to a change in our long-term financial strength and issuer credit ratings on QBE Lenders' Mortgage Insurance Ltd. to 'A+' from 'A'. QBE is the lenders' mortgage insurer to almost all of the loans in this transaction and forms credit support to the notes. Our opinion is that an insurer's capacity to pay is higher for an 'A+' rated insurer than an 'A' rated insurer, and results in us assigning more credit to lenders' mortgage insurance (LMI) for RMBS ratings higher than 'A' (see "Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds," published Dec. 7, 2014). As a result, the minimum credit support at a given rating level for a rated note, after considering LMI, is lower if our rating on the LMI provider is 'A+' than if it's 'A'.
The raised rating on the class B notes reflects the reduced credit support required and strong cash flows in the transaction, which are consistent with the 'AAA' rating level.
The rating affirmations reflect our view of the credit risk of the pools, which have been amortizing in line with our expectations. Credit support for the rated notes comprises note subordination and mortgage insurance covering 100% of the loan portfolio. Current loan-to-value ratios in the portfolio have been declining, lowering our expectation of loss for the pool.
As of Dec. 31, 2023, the pool has a balance of about A$161 million and a pool factor of about 17.9%. The pool's weighted-average loan-to-value ratio is 48.7% and the weighted-average seasoning is 130.7 months.
As of Dec. 31, 2023, loans more than 30 days in arrears make up 0.67% of the current balance, of which 0.24% are more than 90 days in arrears. There have been no losses to date.
We expect that the various mechanisms to support liquidity within the transaction, including an excess revenue reserve funded by available excess spread; principal draws; and a liquidity facility equal to 1.0% of the aggregate invested amount of the notes, are sufficient under our stress assumptions to ensure timely payment of interest.
A fixed- to floating-rate interest-rate swap is provided by GSB to hedge the mismatch between receipts from any fixed-rate mortgage loans and the floating-rate RMBS. National Australia Bank Ltd. will act as standby swap provider in the event that GSB is not appropriately rated.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | RMBS: Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds, Dec. 7, 2014
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- Criteria | Structured Finance | RMBS: Assumptions: Australian RMBS Postcode Classification Assumptions, July 10, 2013
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- Criteria | Structured Finance | RMBS: Australian RMBS Rating Methodology And Assumptions, Sept. 1, 2011
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | RMBS: Methodology And Assumptions For Analyzing The Cash Flow And Payment Structures Of Australian And New Zealand RMBS, June 2, 2010
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
Related Research
- Seven Ratings On Six Australian RMBS Transactions Placed On CreditWatch Positive, Jan. 24, 2024
- An Overview Of Australia's Housing Market And Residential Mortgage-Backed Securities, Dec. 11, 2023
- ESG Industry Report Card: Residential Mortgage-Backed Securities, March 31, 2021
- Australia And New Zealand Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, April 17, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- RMBS Performance Watch: Australia, published quarterly
- RMBS Arrears Statistics: Australia, published monthly
Rating Raised And Removed From CreditWatch Positive
Series 2017-1 Harvey Trust
- Class B: to AAA (sf) from AA+ (sf)/Watch Pos
Ratings Affirmed
Series 2017-1 Harvey Trust
- Class A1: AAA (sf)
- Class A2: AAA (sf)
- Class AB: AAA (sf)
- Class C: A+ (sf)
REGULATORY DISCLOSURES
Please refer to the initial rating report for any additional regulatory disclosures that may apply to a transaction.
The issuer has not informed S&P Global Ratings Australia Pty Ltd. whether the issuer is publicly disclosing all relevant information about the structured finance instruments that are subject to this rating report or whether relevant information remains nonpublic.
AUSTRALIA
S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
| Primary Credit Analyst: | Rohan Libbis, Melbourne +61 3 9631 2172; rohan.libbis@spglobal.com |
| Secondary Contact: | Alisha Treacy, Melbourne + 61 3 9631 2182; alisha.treacy@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.