Fitch Assigns Final Ratings to TORRENS Series 2014-1 Trust

(The following statement was released by the rating agency)

Link to Fitch Ratings' Report: TORRENS Series 2014-1 Trust

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738475

SYDNEY, March 04 (Fitch) Fitch Ratings has assigned final ratings to TORRENS 
Series 2014-1 Trust's residential mortgage-backed floating-rate notes. The 
issuance consists of notes backed by prime Australian residential mortgages 
originated by Bendigo and Adelaide Bank Limited (BEN, A-/Stable/F2). The ratings 
are as follows:

AUD460.0m Class A notes: 'AAAsf'; Outlook Stable;

AUD30.0m Class AB notes: Not Rated; 

AUD7.5m Class B1 notes: Not Rated; and

AUD2.5m Class B2 notes: Not Rated.

The notes have been issued by Perpetual Trustee Company Limited in its capacity 
as trustee of TORRENS Series 2014-1 Trust. 

At the cut-off date, the total collateral pool consisted of 2,429 loans totaling 
approximately AUD497.3m. The weighted average (WA) current loan-to-value ratio 
(LVR) is 64.9%, with an indexed current LVR of 63.5%. The pool is made up of 
100% fully-verified documentation loans, all of which are subject to a variable 
interest rate. All loans are covered by lenders' mortgage insurance (LMI) 
provided by Genworth Financial Mortgage Insurance Pty Limited and QBE Lenders' 
Mortgage Insurance Limited (QBE LMI, Insurer Financial Strength rating: 
AA-/Stable). The pool has geographic diversification, with the largest state 
concentration being Victoria (56.3%). Fitch has incorporated all the above 
factors in its credit analysis of the transaction. 

KEY RATING DRIVERS 

Experienced Originator: BEN is experienced in mortgage lending and servicing, 
and originates loans through its nationwide retail branch network, third-party 
mortgage originators and brokers. The pool contains loans originated through 
BEN's retail network only.

Conservative Pool Characteristics: The WA seasoning of the portfolio is 23 
months, with a WA LVR of 64.9% and an indexed LVR of 63.5%. There are no 
low-documentation loans or interest only loans, while investment loans represent 
5.9% of the pool by balance. All loans are covered by LMI from Genworth (10.1%) 
and QBE LMI (89.9%). All LMI policies exclude timely interest cover. 

Sequential/Pro-Rata Pay down: If serial pay-down triggers are met, principal 
will be paid pro-rata towards all classes of notes. The serial pay-down triggers 
include, but are not limited to: arrears performance; unreimbursed charge-offs; 
and minimum subordination levels for both the Class A and AB notes. The 
reimbursement of losses and prior period losses are paid after the distribution 
of interest on the Class B1 and B2 notes. 

Multiple Sources of Liquidity: Liquidity support will be available to all 
classes of notes and will be provided via excess spread, principal draws, and a 
liquidity facility sized at 1.3% of the outstanding performing mortgage pool, 
followed by an excess revenue reserve funded by available excess income up to a 
maximum of 0.5% of the initial note balance. Interest due for all notes is 
calculated based on each respective invested balance.

Available Replacement Counterparties: Counterparty default risk is mitigated by 
the appointment of National Australia Bank (NAB, AA-/Stable/F1+) as an eligible 
standby fixed-floating rate swap provider.

RATING SENSITIVITY 

Unexpected decreases in the value of residential property, increases in the 
frequency of foreclosures, and loss severity on defaulted mortgages could 
produce loss levels higher than Fitch's base case, which could in turn result in 
potentially negative rating actions on the notes. Fitch evaluated the 
sensitivity of the ratings assigned to TORRENS Series 2014-1 Trust to increased 
defaults and decreased recovery rates over the life of the transaction. Its 
analysis found that the Class A notes' ratings remained stable under Fitch's 
medium (15% increase) and severe default (30% increase) scenarios.

Recovery scenarios, both medium (15% decrease) and severe (30% decrease) did not 
impact the rating of the Class A notes. The transaction is resilient under 
greater sensitivity to a combination of both increased defaults and decreased 
recovery rates with the Class A notes' ratings not being impacted under these 
scenarios. 

Key Rating Drivers and Rating Sensitivities are further discussed in the 
corresponding new issue report entitled "TORRENS Series 2014-1 Trust", published 
today. Included as an appendix to the report are a description of the 
representations, warranties, and enforcement mechanisms.

Contacts: 

Primary Analyst 

Spencer Wilson 

Associate Director

+61 2 8256 0320

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

 

Secondary Analyst

Ben Newey

Director

+61 2 8256 0341

Committee Chairperson

Natasha Vojvodic

Senior Director, 

+61 2 8256 0350

The sources of information identified for this rating action were Bendigo and 
Adelaide Bank Limited, and the issuer's counsel King & Wood Malleson. The issuer 
has informed Fitch that not all relevant underlying information used in the 
analysis of the rated notes is public.

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; "APAC Residential Mortgage Criteria", 
dated 1 August 2013; "APAC Residential Mortgage Criteria Addendum - Australia", 
dated 1 August 2013; and "Global Criteria for Lender's Mortgage Insurance in 
RMBS", dated 1 August 2013 are available at www.fitchratings.com.

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

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research: 

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 Residential Mortgage Criteria - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709855

APAC Residential Mortgage Criteria Addendum – Australia - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710259

Global Criteria for Lenders’ Mortgage Insurance in RMBS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709255

Additional Disclosure 

Solicitation Status 

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=822292

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Fitch Australia Pty Ltd holds an Australian financial services licence (AFS 
licence no. 337123) which authorises it to provide credit ratings to wholesale 
clients only. Credit ratings information published by Fitch is not intended to 
be used by persons who are retail clients within the meaning of the Corporations 
Act 2001.