(The following statement was released by the rating agency) Fitch Ratings-Sydney-January 25: Fitch Ratings has upgraded one and affirmed five tranches of Flexi ABS Trust 2017-1. The Rating Outlook on each tranche remains Stable. The transaction is a securitisation of small-balance unsecured consumer loans originated by Certegy Ezi-Pay Pty Ltd (Certegy) whose ultimate parent is FlexiGroup Limited (FlexiGroup). The notes were issued by Perpetual Corporate Trust Limited in its capacity as trustee. The rating actions are as follows: AUD15.3 million Class A2 notes (ISIN AU3FN0034310) affirmed at 'AAAsf'; Outlook Stable AUD12.1 million Class A2-G notes (ISIN AU3FN0034328) affirmed at 'AAAsf'; Outlook Stable AUD3.3 million Class B notes (ISIN AU3FN0034336) affirmed at 'AAAsf'; Outlook Stable AUD3.8 million Class C notes (ISIN AU3FN0034344) affirmed at 'AAAsf'; Outlook Stable AUD2.6 million Class D notes (ISIN AU3FN0034351) affirmed at 'A+sf'; Outlook Stable AUD1.6 million Class E notes (ISIN AU3FN0034369) upgraded to 'BBBsf; from 'BBB-sf'; Outlook Stable KEY RATING DRIVERS Obligor Default Risk: Obligor default and recovery rates are a key assumption in Fitch's quantitative analysis. Performance of the underlying assets of Flexi ABS Trust 2017-1 has been better than base-case expectations and below the initially modelled scenarios, with minimal realised net losses. Cumulative gross losses were 2.7% at end-December 2018. Strong excess spread since closing has covered all realised losses. Fitch has revised the remaining life default assumption to 2.1% from 3.8% to reflect that the performance of the underlying assets has been below the initially modelled scenarios. The updated base-case assumption has resulted in the expected lifetime default rate of 3.0%, from 4.6% at closing. The recovery assumptions were unchanged at 0%. The transaction is currently amortising pro rata, limiting additional build-up of subordination and exposing the transaction to more back-loaded defaults. Switch back to sequential payment is only expected at call, if a charge-off occurs or if the 60+ day arrears average over six months is greater than 4% of the pool. In the latest reports at end-December 2018, Flexi ABS 2017-1 had 30+ day arrears of 2.5%. While arrears were above Fitch's 3Q18 Dinkum ABS Index of 1.74%, the arrears balance has remained stable as the transactions have paid down and have not translated to higher levels of losses. Fitch expects asset performance to remain stable, supported by sustained economic growth in Australia. Fitch forecasts steady GDP growth of 2.7% and one 25bp cash rate increase in 2019. Stable labour markets and low interest rates further support the outlook for the rated notes. Cash Flow Dynamics: The upgrade of the class E notes and affirmations of the remaining notes reflect the ability of the classes to pass cash flow stresses commensurate with their ratings and Fitch's view that the available credit enhancement (CE) is sufficient to support the ratings. The default timing distribution was modified to reflect the remaining weighted-average life for the transaction. Structural Risks: Structural risks have been evaluated in the initial transaction analysis through the review of transaction documentation, legal opinions and structural features and there have been no changes to any transaction documentation since closing. Counterparty Risks: Counterparty risks have been evaluated in the initial transaction analysis through the review of transaction documentation, legal opinions and structural features and there have been no changes to any transaction counterparties since closing. Servicer, Operational Risks: Certegy is a wholly owned subsidiary of FlexiGroup Limited, a provider of retail point-of-sale consumer finance. Certegy provides interest-free consumer receivables and cheque-guarantee products in Australia. Delinquencies greater than 30 days on Certegy's retail portfolio have historically tracked below 3.0%. The nominated back-up servicer is Dun & Bradstreet (NYSE:DNB), which already has access to Certegy's systems and can step in immediately in the event of servicer termination. Fitch undertook an onsite operational review and found that the operations of the servicer were comparable with that of other consumer finance lenders. Residual Value Risks: There is no residual value risk. RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, which is likely to result in a decline in CE and remaining loss-coverage levels available to the notes. Fitch has evaluated the sensitivity of the ratings to increased gross default levels and decreased recovery rates over the life of the transactions. Class: A2 (A2 and A2-G), B, C, D and E Rating: AAAsf /AAAsf/AAAsf/A+sf/BBBsf Expected impact upon the note rating of increased defaults: Increase defaults by 10%: AAAsf /AAAsf/AA+sf/Asf/BBB-sf Increase defaults by 25%: AAAsf /AAAsf/AAsf/A-sf/BB+sf Increase defaults by 50%: AAAsf /AAAsf/A+sf/BBBsf/BBsf Expected impact upon the note rating of decreased recoveries: Reduce recoveries by 10%: AAAsf /AAAsf/AAAsf/A+sf/BBBsf Reduce recoveries by 25%: AAAsf /AAAsf/AAAsf/A+sf/BBBsf Reduce recoveries by 50%: AAAsf /AAAsf/AAAsf/A+sf/BBBsf Expected impact upon the note rating of multiple factors: Increase defaults by 10%; reduce recoveries by 10%: AAAsf /AAAsf/AA+sf/Asf/BBB-sf Increase defaults by 25%; reduce recoveries by 25%: AAAsf /AAAsf/AAsf/A-sf/BB+sf
Increase defaults by 50%; reduce recoveries by 50%: AAAsf /AAAsf/A+sf/BBBsf/BBsf 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.
DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio as part of its ongoing monitoring. Prior to closing, Fitch sought to receive a third party assessment conducted on the asset portfolio information, but none were made available to Fitch for this transaction. As part of its on-going monitoring, Fitch conducted a file review of a small targeted sample of FlexiGroup'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: Loan-by-loan data provided by FlexiGroup at December 2018 Transaction reporting data provided by FlexiGroup at December 2018 The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Lead Surveillance Analyst Hai Duong Le Associate Director +612 8256 0358 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney, NSW 2000 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com; Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Consumer ABS Rating Criteria (pub. 18 Jan 2019) https://www.fitchratings.com/site/re/10059751 Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018863 Global Structured Finance Rating Criteria (pub. 15 May 2018) https://www.fitchratings.com/site/re/10029600 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039504 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039505 Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018549 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10060567 Solicitation Status https://www.fitchratings.com/site/pr/10060567#solicitation Endorsement Policy https://www.fitchratings.com/regulatory 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 © 2019 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 https://www.fitchratings.com/site/regulatory), 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.