Pepper Residential Securities Trust No.17 RMBS Assigned Preliminary Ratings

Stocks and Financial Services Press Releases Tuesday October 4, 2016 16:37
MELBOURNE--4 Oct--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Oct. 4, 2016--S&P Global Ratings today assigned its preliminary ratings to five classes of nonconforming residential mortgage-backed securities (RMBS) to be issued by Permanent Custodians Ltd. as trustee of Pepper Residential Securities Trust No.17 (see list). Pepper Residential Securities Trust No.17 is a securitization of nonconforming residential mortgages originated by Pepper HomeLoans Pty Ltd.

The preliminary ratings reflect:

Our view of the credit risk of the underlying collateral portfolio, including our view that the credit support is sufficient to withstand the stresses we apply. The credit support for the rated notes comprises note subordination. Subordination provided to the 'AAA (sf)' rated notes is in excess in our opinion of the minimum 'AAA (sf)' level of credit support.

The underwriting standard and centralized approval process of the seller, Pepper Homeloans.

The availability of a retention amount, amortization amount, and yield reserve, which will all be funded by excess spread, but at various stages of the transaction's term. They will have separate functions and timeframes, including reducing the balance of senior notes, reducing the balance of the most subordinated notes, and paying senior expenses and interest shortfalls on the class A notes.

Our expectation that the various mechanisms to support liquidity within the transaction, including a liquidity facility equal to 2.5% of the outstanding balance of the notes, and principal draws, are sufficient under our stress assumptions to ensure timely payment of interest.

In addition, there is a condition that a minimum margin will be maintained on the assets.
The benefit of a cross-currency swap to hedge the mismatch between the Australian dollar receipts from the underlying assets and the U.S. dollar payments on the class A1-ua and class A1-ub notes.
The benefit of a liability swap to hedge the interest-rate risk between the fixed-interest due on the class A1-af notes and the interest received on the underlying mortgages.

A copy of S&P Global Ratings' complete report for Pepper Residential Securities Trust No.17 can be found on RatingsDirect, S&P Global Ratings' web-based credit analysis system, athttp://www.globalcreditportal.com

The issuer has not informed Standard & Poor's (Australia) Pty Ltd. whether the issuer is publically disclosing all relevant information about the structured finance instruments that are subject to this rating report or whether relevant information remains non-public.

S&P GLOBAL RATINGS 17G-7 DISCLOSURE REPORT

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities.

The S&P Global Ratings 17g-7 Disclosure Report included in this credit rating report is available at http://www.standardandpoors.com/en_US/web/guest/article/-/view/type/PDF/id/1729 399

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