Fitch Assigns Expected Rating of ‘AAA(EXP)’ to Medallion Trust Series 2013-2’s Class A3-R Notes

Un operatore a lavoro. REUTERS/Brendan McDermid

(The following statement was released by the rating agency) Fitch Ratings-Sydney-July 09: Fitch Ratings has assigned an expected rating of ‘AAA(EXP)’ to Medallion Trust Series 2013-2’s AUD400 million class A3-R residential mortgage-backed floating-rate notes. The Outlook is Stable. The full outstanding balance of the fixed-rate soft-bullet class A3 notes will be repaid with funds raised via the issuance of the class A3-R notes. The class A3 notes were issued in August 2013 for AUD400 million as part of the Medallion Trust Series 2013-2 AUD3.2 billion RMBS issue by Commonwealth Bank of Australia (CBA, AA-/Negative/F1+). The transaction continues to perform in line with Fitch’s expectations at closing and has paid down to about AUD987.3 million as at the June 2018 payment date. The ratings of the remaining notes remain unchanged and were affirmed on 1 December 2017. The A3-R notes will be issued by Perpetual Trustee Company Limited in its capacity as Trustee of Medallion Trust Series 2013-2. KEY RATING DRIVERS Macroeconomic Factors: Fitch expects stable mortgage performance, supported by sustained economic growth in Australia that is driven by steady forecast GDP growth of 2.7% and one 25bp cash rate increase in 2019. Asset and Cash Flow Analysis: The class A3-R note benefits from credit enhancement of 16.6%. Structural features include a liquidity facility sized at 3.0% of the performing asset balance, with a floor of AUD9.6 million. Credit quality and performance of the underlying receivables remain strong. The asset model was not run as transaction performance has remained stable since the tranches were affirmed. The cash flow model was not re-run as the A3-R notes replace the A3 notes with the same conditions and there have been no changes to Fitch’s cash flow model assumptions since the cash flow model was run. Operational Risk: CBA has considerable experience in mortgage lending and servicing. Arrears of securitised Medallion transactions have tracked in-line or below Fitch’s Dinkum Index for prime RMBS. Its lending and servicing practices are in line with those of other comparable lenders.

EXPECTED RATING SENSITIVITIES Unexpected falls in the value of residential property, increased foreclosures and loss severity on defaulted mortgages could produce higher losses than Fitch’s base case. This could in turn result in negative rating action on the notes. The class A3-R notes are independent of downgrades in the lenders’ mortgage insurer’s ratings. Fitch’s initial rating drivers and rating sensitivities are discussed in the new issue report, Medallion Trust Series 2013-2, dated 30 August 2013, and available at USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction’s representations, warranties and enforcement mechanisms (RW&E) is available by accessing the appendix referenced under “Related Research” below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class, as detailed in the Special Report titled “Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,” dated 26 March 2015. DATA ADEQUACY Fitch sought to receive a third-party assessment conducted on the asset portfolio information at closing, but none was available for the issue. As part of its ongoing monitoring, Fitch reviewed a small targeted sample of CBA’s origination files and found the information contained in the reviewed files to be adequately consistent with the originator’s policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch’s assessment of the asset pool information relied upon for the agency’s rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Expected yield analysis details provided by CBA as at 21 June 2018. Transaction reporting data provided by CBA for the June 2018 payment date. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst Hai Duong Le Associate Director 61 2 8256 0358 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 2000 Secondary Analyst James Leung Director 61 2 8256 0322 Committee Chairperson Natasha Vojvodic Senior Director 61 2 8256 0350 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available on Applicable Criteria APAC Residential Mortgage Rating Criteria (pub. 14 Jul 2017) Exposure Draft: Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 31 May 2018) Global Structured Finance Rating Criteria (pub. 15 May 2018) RMBS Lenders’ Mortgage Insurance Rating Criteria (pub. 03 Apr 2018) Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 31 May 2018) Related Research Medallion Trust Series 2013-2 Medallion Trust Series 2013-2 Appendix Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions (Applicable to Transactions Rated from Sept.26, 2011 until June 15, 2015) Additional Disclosures Dodd-Frank Rating Information Disclosure Form Solicitation Status Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. 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. Copyright © 2018 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes 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 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the “NRSRO”). While certain of the NRSRO’s credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see, other credit rating subsidiaries are not listed on Form NRSRO (the “non-NRSROs”) and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.