RPT-Fitch upgrades 2, affirms 30 tranches of Bella Trust ABS transactions

Wed Jan 29, 2014 3:03am EST

Related Topics

(Repeat for additional subscribers)

Jan 29 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed the ratings of two Bella Trust Series and four Bella Trust No. 2 Series transactions. The rating actions are listed at the end of this commentary.

Bella Trust No. 2 Series 2011-2 and Bella Trust No. 2 Series 2012-1 are securitisations of automotive and equipment loan receivables, while the remaining Bella Trust No. 2 Series and Bella Trust Series are securitisations of automotive loan receivables only, all of which are originated by Capital Finance Australia Limited (CFAL).

KEY RATING DRIVERS

The rating actions reflect Fitch's view that the transactions are able to cover future losses with available excess income. All of the transactions have experienced losses in line with, or lower than, Fitch estimates at closing, and have been covered by excess spread. The rating actions also reflect Fitch's view that, in line with expectations of Australia's economic conditions, available credit enhancement (CE) is sufficient to support the notes' current ratings. As of the payment date in December 2013, the Bella Trust Series 2010-1 notes had amortised by 88% and CE available to noteholders had increased by 3.3x since closing in July 2010. Collateral characteristics had not changed materially since closing, and cumulative net losses amounted to AUD7,201,583, or 1.19% of the initial collateral balance, as at 30 November 2013, less than Fitch's base case estimate.

As of the payment date in December 2013, the Bella Trust Series 2010-2 notes had amortised by 83% and CE available to noteholders had increased by 2.9x since closing in December 2010. Collateral characteristics had not changed materially since closing and cumulative net losses amounted to AUD6,579,370, or 1.3% of the initial collateral balance, as at 30 November 2013, less than Fitch's base case estimate.

As of the payment date in December 2013, the Bella Trust No. 2 Series 2011-1 notes had amortised by 74% and CE available to noteholders had increased by 2.5x since closing in June 2011. Collateral characteristics had not changed materially since closing and cumulative net losses amounted to AUD5,147,671, or 0.94% of the initial collateral balance, as at 30 November 2013, less than Fitch's base case estimate.

As of the payment date in December 2013, the Bella Trust No. 2 Series 2011-2 notes had amortised by 77% and CE available to noteholders had increased by 2.6x since closing in September 2011. Collateral characteristics had not changed materially since closing and cumulative net losses amounted to AUD6,393,246, or 0.94% of the initial collateral balance, as at 30 November 2013, less than Fitch's base case estimate.

As of the payment date in December 2013, the Bella Trust No. 2 Series 2011-3 notes had amortised by 61.9% and CE available to noteholders had increased by 2.2x since closing in December 2011. Collateral characteristics had not changed materially since closing and cumulative net losses amounted to AUD6,208,005, or 1.1% of the initial collateral balance, as at 30 November 2013, less than Fitch's base case estimate.

As of the payment date in December 2013, the Bella Trust No. 2 Series 2012-1 notes had amortised by 58% and CE available to noteholders had increased by 2.2x since closing in May 2012. Collateral characteristics had not changed materially since closing and cumulative net losses amounted to AUD2,897,585, or 0.65% of the initial collateral balance, as at 30 November 2013, also less than Fitch's base case estimate.

RATING SENSITIVITIES

All the Bella transactions have been building CE, which is largely driven by asset performance, positive excess spread and the low cost of the subordinated notes. Fitch has analysed default scenarios for each Bella transaction, above and beyond current rating levels, and concludes that each has adequate subordination and excess spread to absorb any significant potential losses. The agency therefore believes that the possibility of performance-driven downgrades is remote. Although performance remains strong, the underlying assets remain susceptible to economic shocks while the CE provided by the lower notes is controlled by pro rata mechanisms, meaning prospects for upgrades remain limited.

INITIAL KEY RATING DRIVERS

The final ratings and outlooks assigned to the notes are based on: the quality of the collateral; the CE provided by the respective subordinate notes; a strong flow of excess spread; the liquidity reserve account sized at 1.0% of the invested amount of the notes at closing funded by issue proceeds, the interest rate swap arrangements the trustee has entered into; and CFAL's underwriting and servicing capabilities. The ratings on the Class B, C, D and E notes are based on all the strengths supporting the Class A notes except their CE levels.

INITIAL RATING SENSITIVITIES

The unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch'€™s base case, and would likely result in a decline in CE and remaining loss-coverage levels available to the notes. Decreased CE may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.

The rating actions are as follows:

Bella Trust Series 2010-1:

AUD27.4m Class A2 affirmed at 'AAAsf'; Outlook Stable;

AUD10.2m Class B affirmed at 'Asf'; Outlook Stable;

AUD2m Class C upgraded to a€˜Asfa€™ from 'BBBsf'; Outlook Stable;

AUD4m Class D affirmed at 'BBsf'; Outlook Stable; and

AUD8m Class E affirmed at 'Bsf'; Outlook Stable.

Bella Trust Series 2010-2:

AUD97.7m Class A2 affirmed at 'AAAsf'; Outlook Stable;

AUD37.5m Class B affirmed at 'Asf'; Outlook Stable;

AUD7m Class C upgraded to a€˜Asfa€™ from 'BBBsf'; Outlook Stable;

AUD4m Class D affirmed at 'BBsf'; Outlook Stable; and

AUD7m Class E affirmed at 'Bsf'; Outlook Stable.

Bella Trust No. 2 Series 2011-1:

GBP52.4m Class A2a affirmed at 'AAAsf'; Outlook Stable;

AUD77m Class A2b affirmed at 'AAAsf'; Outlook Stable;

AUD53.5m Class B affirmed at 'Asf'; Outlook Stable;

AUD16.9m Class C affirmed at 'BBBsf'; Outlook revised to Positive from Stable;

AUD4.2m Class D affirmed at 'BBsf'; Outlook Stable; and

AUD10.4m Class E affirmed at 'Bsf'; Outlook Stable.

Bella Trust No. 2 Series 2011-2:

AUD177.7m Class A affirmed at 'AAAsf'; Outlook Stable;

AUD75.9m Class B affirmed at 'Asf'; Outlook Stable;

AUD19.4m Class C affirmed at 'BBBsf'; Outlook revised to Positive from Stable;

AUD5.5m Class D affirmed at 'BBsf'; Outlook Stable; and

AUD14.4m Class E affirmed at 'Bsf'; Outlook Stable.

Bella Trust No. 2 Series 2011-3:

GBP64.3m Class A2a affirmed at 'AAAsf'; Outlook Stable;

AUD142.8m Class A2b affirmed at 'AAAsf'; Outlook Stable;

AUD58m Class B affirmed at 'Asf'; Outlook Stable;

AUD18.2m Class C affirmed at 'BBBsf'; Outlook Stable;

AUD4.5m Class D affirmed at 'BBsf'; Outlook Stable; and

AUD10.8m Class E affirmed at 'Bsf'; Outlook Stable.

Class A1 was paid in full in May 2012.

Bella Trust No. 2 Series 2012-1:

USD100.8m Class A affirmed at 'AAAsf'; Outlook Stable;

AUD57.7m Class B affirmed at 'Asf'; Outlook Stable;

AUD8.7m Class C affirmed at 'BBBsf'; Outlook Stable;

AUD10m Class D affirmed at 'BBsf'; Outlook Stable; and

AUD4.5m Class E affirmed at 'Bsf'; Outlook Stable.

A comparison of the transactiona€™s representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below.

FILED UNDER: