Fitch Assigns Ratings to Pinnacle Series Trust 2014-SST

(The following statement was released by the rating agency)

Link to Fitch Ratings' Report: Pinnacle Series Trust 2014-SST - Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736856

SYDNEY, February 24 (Fitch) Fitch Ratings has assigned a rating to Pinnacle 
Series Trust 2014-SST's Class A notes. The transaction is an internal 
securitisation of first-ranking prime Australian residential mortgages 
originated by Police & Nurses Limited (P&N), trading as P&N Bank. The ratings 
are as follows:

AUD326.8m Class A notes: 'AAAsf'; Outlook Stable; and

AUD38.3m Class B notes: Not Rated.

The notes are issued by BNY Trust Company of Australia Limited as trustee of the 
Pinnacle Series Trust 2014-SST.

KEY RATING DRIVERS

Experienced Lender: P&N is an experienced residential lender and has been 
involved in the origination, servicing, and management of housing loans since 
1990. P&N originates loans through its Western Australian based branch network, 
mobile lenders and brokers.

 

Strong Collateral Characteristics: The weighted average (WA) seasoning of the 
portfolio is 21.7 months, with a WA current loan to value ratio (LVR) of 67.3%, 
and a WA indexed LVR of 66.3%. Lenders' mortgage insurance (LMI) is present on 
27.2% of the total loan pool, with all other loans being insurable, if required. 
Investment loans make up 12.5% of the loan pool, with interest only loans 
representing 11.7%, and first home buyer loans 15.3%.

Geographic Concentration in Western Australia: P&N's collateral is highly 
concentrated in Western Australia, reflecting its origins and local branch 
network. A total of 97.7% of the pool is located in Western Australia, with 
88.1% being in the Perth metropolitan area. 

Good Structural Support: The Class A notes benefit from 10.5% support provided 
by the Class B notes, which is significantly in excess of Fitch's breakeven 
'AAAsf' support level, including support from LMI. The transaction also benefits 
from a sequential pay structure with interest and principal paid sequentially to 
the Class A and B notes at all times. The transaction has a liquidity reserve 
sized at 1.5% of the total loan pool.

Substitution Pool Parameters: The transaction includes a 10-year substitution 
period. Various eligibility criteria and pool parameters are in place to ensure 
that during the substitution period the process maintains a stable credit 
profile.

RATING SENSITIVITIES

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 result in 
potentially negative rating actions on the notes. Fitch evaluated the 
sensitivity of Pinnacle Series Trust 2014-SST's assigned ratings 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 scenario (15% increase), but were sensitive to Fitch's severe default 
(30% increase) scenario. Recovery scenarios, saw similar impact with the Class A 
notes' ratings remaining stable under Fitch's medium scenario (15% increase), 
but sensitive to Fitch's severe default (30% increase) scenario.

The transaction shows greater sensitivity to a combination of both increased 
defaults and decreased recovery rates with the Class A notes' ratings 
experiencing greater downgrade potential.

Available on www.fitchratings.com or by clicking on the above link is a report 
entitled "Pinnacle Series Trust 2014-SST Representations and Warranties", which 
includes a description of the representations, warranties, and enforcement 
mechanisms within the transaction. 

Contacts: 

Primary Analyst

David Carroll

Director

+61 2 8256 0333

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

Secondary Analyst

Anthea Clark

Associate Director

+61 2 8256 0379

Committee Chairperson

Natasha Vojvodic

Senior Director

+61 2 8256 0350

The source of information used to assess these ratings was the originator of the 
assets, P&N and their counsel, Allen & Overy. 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; "Criteria for Servicing Continuity Risk 
in Structured Finance" dated 26 July 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

Criteria for Servicing Continuity Risk in Structured Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=712935

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=821353

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: 
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DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S 
FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND 
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF 
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AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF 
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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.

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.