SBS Oreti Trust No.2 RMBS Class 1 Note Rating Affirmed After Note Issuance Increase

Stocks and Financial Services Press Releases Monday December 19, 2016 08:44
MELBOURNE--19 Dec--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Dec. 19, 2016--S&P Global Ratings today affirmed its 'AAA (sf)' rating on the class 1 residential mortgage-backed securities (RMBS) notes issued by Trustees Executors Ltd. as trustee for SBS Oreti Trust No.2. SBS Oreti Trust No.2 is a securitization of fully amortizing New Zealand-dollar loans, secured by mortgages over New Zealand properties.

The rating affirmation follows a top-up of approximately NZ$107.5 million of New Zealand residential mortgage assets into SBS Oreti Trust No.2 that will be funded by further class 1 and class 2 note issuance. This takes the total amount of class 1 notes issued to NZ$200.76 million and the total amount of class 2 notes issued to NZ$13.36 million. Through the top-up mechanism in the transaction documents, new notes may be issued by the trustee to fund the acquisition of additional loans into the trust.

The rating affirmation reflects:

Our view of the credit risk of the underlying collateral portfolio, which has improved since transaction close. Loans that are less than 60% loan-to-value ratio make up just over 66% of the pool. In addition, 48.6% of the loans in the portfolio are seasoned by more than five years.

Our view that the credit support is sufficient to withstand the stresses we apply. This credit support comprises note subordination for the class 1 notes equal to 6.3%.

Our expectation that the various mechanisms to support liquidity within the transaction, including a cash reserve equal to 4.4% of the invested amount of all notes, and principal draws, are sufficient under our stress assumptions to ensure timely payment of interest.

The management of interest rate risk. Just on 76.3% of the loans in the portfolio have a fixed interest rate with a term of up to five years. Interest-rate risk between any fixed-rate mortgage loan and the floating-rate obligations on the notes are hedged via interest-rate swaps provided by Westpac Banking Corp.

Class Rating
1 AAA (sf)
2 NR
NR--Not rated.

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