Fitch Assigns Expected Ratings to SMART ABS Series 2014-1US Trust

(The following statement was released by the rating agency)

SYDNEY, March 03 (Fitch) Fitch Ratings has assigned expected ratings to SMART 
ABS Series 2014-1US Trust's automotive lease-backed fixed and floating-rate 
notes. The issuance consists of notes backed by Australian automotive lease 
receivables originated by Macquarie Leasing Pty Limited (Macquarie Leasing). The 
ratings are as follows:

USD90.0m Class A-1 notes: 'F1+(EXP)sf';

USD134.0m Class A-2 (a & b) notes: 'AAA(EXP)sf'; Outlook Stable;

USD166.0m Class A-3 (a & b) notes: 'AAA(EXP)sf'; Outlook Stable;

USD110.0m Class A-4 (a & b) notes: 'AAA(EXP)sf'; Outlook Stable;

AUD9.7m Class B notes: 'AA(EXP)sf'; Outlook Stable;

AUD17.8m Class C notes: 'A(EXP)sf'; Outlook Stable;

AUD17.8m Class D notes: 'BBB(EXP)sf'; Outlook Stable;

AUD16.1m Class E notes: 'BB(EXP)sf'; Outlook Stable; and

AUD16.1m seller notes: Not Rated.

The final ratings are contingent on receipt of final documents conforming to 
information already received.

The notes are issued by Perpetual Trustee Company Limited in its capacity as 
trustee of SMART ABS Series 2014-1US Trust. The latter is a legally distinct 
trust established pursuant to a master trust and security trust deed. 

At the cut-off date, the total collateral pool consisted of 34,848 leases 
totaling AUD1,233m, averaging AUD35,380. The pool is predominantly made up of 
passenger and light commercial vehicle receivables from Australian residents 
across the country, and consists of amortising principal and interest leases 
with varying balloon amounts payable at maturity. 

KEY RATING DRIVERS 

The expected ratings on the Class A notes are based on: the quality of the 
collateral; the 12% credit enhancement provided by the subordinate Class B, C, 
D, and E notes; the unrated seller notes; and excess spread. They also reflect a 
liquidity reserve account sized at 1% of the aggregate amount of the notes at 
closing; an interest rate swap arrangement the trustee has entered into with 
Macquarie Bank Ltd (A/Stable/F1); a currency swap arrangement the trustee has 
entered into with Australia & New Zealand Banking Group (AA-/Stable/F1+); and 
Macquarie Leasing Pty Ltd's lease underwriting and servicing capabilities.

The expected ratings on the other classes of notes are based on all the 
strengths supporting the Class A notes, excluding their credit enhancement 
levels, but including the credit enhancement provided by each class of notes' 
respective subordinate notes.

The transaction benefits from a highly diverse portfolio in terms of both 
obligor and regional concentration and is similar, in both portfolio 
characteristics and structure, to other SMART ABS Series transactions issued 
into the US market.

The main industry exposures include: property and business services (32.5%); 
government, administration & defence (17.1%); health & community services 
(11.4%); other industries (9.1%); transport & storage (8.5%); and construction 
(7.5%). The weighted average balloon payment for the portfolio is 26.5% of the 
original lease balance. The majority of leases consist of novated contracts 
(62.9%), where the lease is novated to the employer in salary packaging 
arrangements. 

The base case for novated leases (car) has been increased to 1.50% from 1.35%. 
This is due to an increase in historical losses for leases originated in the 
2010-2012 cohorts. Historical gross losses by quarterly vintage on novated 
leases (car) range from 0.3%-1.5%; non-novated leases (cars) 1.0%-3.6%; and 
trucks 0.5%-5.0%. 30+ days delinquencies have traditionally tracked below 1.0% 
for the Macquarie Leasing book.

RATING SENSITIVITIES

Unexpected increases in the frequency of foreclosures, and the loss severity on 
defaulted loans, could produce loss levels higher than Fitch's base case, which 
could in turn result in potentially negative rating actions on the notes. Fitch 
has evaluated the sensitivity of the ratings assigned to SMART ABS Series 
2014-1US Trust to increased gross default levels, and decreased recovery rates 
over the life of the transaction.

Its analysis found that all notes' ratings are not susceptible to downgrades 
under Fitch's mild (10% increase), moderate (25% increase) and severe default 
(50% increase) scenarios. 

Recovery scenarios, whereby recovery rate assumptions are decreased, showed that 
no notes were impacted under each scenario tested. These include mild (10% 
decrease), moderate (25% decrease) and severe (50% decrease) stress scenarios. 
The analysis also showed that all notes remain stable under a combination of 
default and mild, moderate and severe recovery stress scenarios.

Fitch's key rating drivers and rating sensitivities analysis are discussed 
further in the corresponding Presale report entitled "SMART ABS Series 2014-1US 
Trust", published today. Included as an appendix to the report are a description 
of the representations, warranties, and enforcement mechanisms.

Contacts: 

Primary Analyst 

Courtney Miller

Analyst

+612 8256 0347 

Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000

 

Secondary Analyst

Ben Newey

Director

+612 8256 0341 

Committee Chairperson

Natasha Vojvodic

Senior Director

+612 8256 0350

Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: 
iselle.gonzalez@fitchratings.com.

The source of information identified for this rating action was informed by 
information from Macquarie Bank Ltd, as arranger and the issuer's counsel Allen 
& Overy. The issuer has informed Fitch that not all relevant underlying 
information used in the analysis of the rated notes is public.

Additional information is available at www.fitchratings.com. 

Applicable criteria, "Global Structured Finance Rating Criteria", dated 24 May 
2013; "Counterparty Criteria for Structured Finance and Covered Bonds", dated 13 
May 2013; "Counterparty Criteria for Structured Finance and Covered Bonds: 
Derivative Addendum", dated 13 May 2013; and "APAC Consumer ABS Rating 
Criteria", dated 24 July 2013.

Applicable Criteria and Related Research: SMART ABS Series 2014-1US Trust

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=737895

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative 
Addendum

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707156

APAC Consumer ABS Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=711196

Additional Disclosure 

Solicitation Status 

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=822234

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