Fitch Ratings has assigned final ratings to RESIMAC Bastille Trust - RESIMAC Series 2022-2NC's mortgage-backed pass-through floating-rate notes.

The issuance consists of notes backed by a pool of Australian conforming and non-conforming residential full- and low-documentation mortgage loans originated by RESIMAC Limited. The notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of RESIMAC Bastille Trust - RESIMAC Series 2022-2NC.

RATING ACTIONS

Entity / Debt

Rating

Prior

RESIMAC Bastille Trust - RESIMAC Series 2022-2NC

A1 AU3FN0074050

LT

AAAsf

New Rating

AAA(EXP)sf

A2 AU3FN0074068

LT

AAAsf

New Rating

AAA(EXP)sf

AB AU3FN0074043

LT

AAAsf

New Rating

AAA(EXP)sf

B AU3FN0074076

LT

NRsf

New Rating

NR(EXP)sf

C AU3FN0074035

LT

NRsf

New Rating

NR(EXP)sf

D AU3FN0074019

LT

NRsf

New Rating

NR(EXP)sf

E AU3FN0074027

LT

NRsf

New Rating

NR(EXP)sf

F AU3FN0074001

LT

NRsf

New Rating

NR(EXP)sf

G AU3FN0073995

LT

NRsf

New Rating

NR(EXP)sf

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

The collateral pool is unchanged from the assignment of the expected rating and consisted of 768 obligors and totalled AUD499.9 million at the 8 November 2022 cut-off date.

KEY RATING DRIVERS

Sufficient Credit Enhancement Mitigates Expected 'AAAsf' Losses: The 'AAAsf' weighted-average (WA) foreclosure frequency of 21.0% is driven by the WA unindexed loan/value ratio (LVR) of 70.2%, non-conforming loans under Fitch's methodology forming 22.3% of the pool, low-documentation loans accounting for 91.8%, self-employed borrowers comprising 93.0% and Fitch-calculated investment loans making up 39.0%.

The 'AAAsf' portfolio loss of 9.6% compares with 7.6% for the previous RESIMAC Bastille transaction - RESIMAC Bastille Trust Series 2022-1NC - due to the higher WA current LVR and greater amount of Fitch-classified non-conforming and investment loans, low documentation loans, loans to self-employed borrowers and interest-only loans. The 'AAAsf' WA recovery rate of 54.0% is driven by the portfolio's WA indexed scheduled LVR of 69.1%. The class A1 and A2 notes benefit from credit enhancement of 25.0% and the class AB from 15.0%.

Limited Liquidity Risk: Structural features include retention and amortisation amounts that redirect excess income to repay the notes' principal balances and a liquidity facility sized at 1.5% of the note balance, with a floor of AUD0.75 million, sufficient to mitigate Fitch's payment interruption risk. The class A1, A2 and AB notes can withstand all relevant Fitch stresses applied in our cash flow analysis.

Low Operational Risk: RESIMAC is a non-bank financial institution, with a history dating back to 1985. Fitch has assessed and found that the operations of the originator and servicer were comparable with those of other Australian non-bank lenders.

Tight Labour Market to Support Outlook: Performance is supported by Australia's continued economic growth, with GDP growth of 5.9% for the year to September 2022, and a tight labour market that recorded an unemployment rate of 3.4% for October 2022. This is despite increasing interest rates. We expect GDP growth to slow to 1.5% in 2023, with unemployment increasing to 4.2%, reflecting high inflation combined with our weaker outlook for China and the global economy more generally.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The transaction's performance may be affected by changes in market conditions and the economic environment. Weakening asset performance is strongly correlated with increasing levels of delinquencies and defaults that could reduce credit enhancement available to the notes.

Downgrade Sensitivities

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis by stressing a transaction's initial base-case assumptions. Fitch applies the recovery rate stress to the recovery rate to isolate the effect of a change in recovery proceeds at the borrower level.

Notes: A1/A2/AB

Final Rating: AAAsf/AAAsf/AAAsf

Increase defaults by 15%: AAAsf/AAAsf/AAAsf

Increase defaults by 30%: AAAsf/AAAsf/AAAsf

Reduce recoveries by 15%: AAAsf/AAAsf/AAAsf

Reduce recoveries by 30%: AAAsf/AAAsf/AAAsf

Increase defaults by 15% and reduce recoveries by 15%: AAAsf/AAAsf/AAAsf

Increase defaults by 30% and reduce recoveries by 30%: AAAsf/AAAsf/AA+sf

The transaction structure supports ratings independent of lenders' mortgage insurance (LMI) for the class A1, A2 and AB notes, as LMI is not required to support the ratings due to the level of credit support provided by the lower ranked notes.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The rated notes are at 'AAAsf', which is the highest level on Fitch's scale. The ratings cannot be upgraded.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

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 sought to receive a third-party assessment conducted on the asset portfolio information, but none was made available for this transaction.

As part of its ongoing monitoring, Fitch reviewed a small targeted sample of RESIMAC'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, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

Date of Relevant Committee

23 November 2022

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. 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'.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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