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Fitch Assigns Final Ratings to Medallion Trust Series 2014-1P
May 2, 2014 / 3:17 AM / 4 years ago

Fitch Assigns Final Ratings to Medallion Trust Series 2014-1P

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Medallion Trust Series 2014-1P here SYDNEY, May 01 (Fitch) Fitch Ratings has assigned final ratings to Medallion Trust Series 2014-1P's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential mortgages originated by Commonwealth Bank of Australia Limited (CBA, AA-/Stable/F1+). The ratings are as follows: AUD506.0m Class A1 notes: 'AAAsf'; Outlook Stable; AUD33.0m Class B notes: 'Asf'; Outlook Stable; and AUD11.0m Class C notes: 'Not Rated'. The notes are issued by Perpetual Trustee Company Limited in its capacity as trustee of Medallion Trust Series 2014-1P. KEY RATING DRIVERS Experienced Originator: CBA has a long experience in mortgage lending and servicing, and originates loans through its nationwide branch network, mobile sales force, online and telephone sales operations as well as through third-party mortgage brokers. Conservative Pool Characteristics: The weighted average (WA) seasoning of the portfolio is 24.1 months, with a WA loan to value ratio (LVR) of 58.7%, and a WA indexed LVR of 58.5%. Investment loans make up 24.7% of the pool by balance, with lenders' mortgage insurance (LMI) covering 12.6%, provided by Genworth Financial Mortgage Insurance Pty Limited. Class A1 Refinancing Option: The Class A1 notes may be refinanced by issuance of Class A1-R notes on the Class A1 refinancing date in April 2020, or on any following distribution date. Class A1-R notes will be issued if the following conditions are met: proceeds must be used to redeem the Class A1 notes in full; must be assigned the same rating as the Class A1 notes; and have a margin lower than the Class A1 margin at closing. Refinancing may only occur once. Sequential/Pro-Rata Paydown: Interest is paid sequentially (after expenses) towards the Class A, B, and then C notes. The reimbursement of all losses is paid prior to the distribution of interest on the Class C notes. Principal will be allocated pro rata towards the Class A and B notes if certain conditions are met, while the Class C notes' principal will be allocated to the Class B notes until all other notes are repaid in full. Strong Track Record: The Medallion series has performed as expected, with arrears tracking in line or below Fitch's Dinkum RMBS Index. RATING SENSITIVITIES Unexpected decreases in residential property value, 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 Medallion Trust Series 2014-1P to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found that the Class A notes' rating remained stable under each of Fitch's medium and severe default and recovery scenarios individually, but was impacted by the combined severe scenario (30% decrease in recovery rates and 30% increase in loss severity), with a single notch rating deterioration to 'AA+sf'. The rating on the Class B notes was impacted by the 30% decreased recovery rates scenario with rating deterioration to 'BBB+sf' and the combined severe scenario (30% decrease in recovery rates and 30% increase in loss severity), with rating deterioration to 'BBBsf'. Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "Medallion Trust Series 2014-1P", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms. Contacts: Primary Analyst Anthea Clark Associate Director +612 8256 0379 Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000 Secondary Analyst David Carroll Director +612 8256 0333 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 The source of information identified for this rating action was informed by information from Commonwealth Bank of Australia Limited as arranger, and the issuer's counsel King & Wood Mallesons. 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 here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here Criteria for Servicing Continuity Risk in Structured Finance here APAC Residential Mortgage Criteria - Amended here APAC Residential Mortgage Criteria Addendum – Australia - Amended here Global Criteria for Lenders’ Mortgage Insurance in RMBS here Additional Disclosure Solicitation Status null/gws/en/disclosure/solicitation?pr_id=828517 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING 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 CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 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.

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