La Trobe Financial Capital Markets Trust 2019-1 Nonconforming RMBS Assigned Preliminary Ratings

MELBOURNE (S&P Global Ratings) April 1, 2019--S&P Global Ratings today 
assigned its preliminary ratings to nine classes of residential 
mortgage-backed securities (RMBS) to be issued by Perpetual Corporate Trust 
Ltd. as trustee for La Trobe Financial Capital Markets Trust 2019-1 (see 
list). La Trobe Financial Capital Markets Trust 2019-1 is a securitization of 
nonconforming and prime residential mortgages originated by La Trobe Financial 
Services Pty Ltd. (La Trobe Financial).

The preliminary ratings reflect:
  • That the credit risk of the underlying collateral portfolio and the credit support provided to each class of notes are commensurate with the ratings assigned. Credit support is provided by subordination and excess spread. The credit support provided to the rated notes is sufficient to cover the assumed losses at the applicable rating stress. The assessment of credit risk takes into account La Trobe Financial's underwriting standards and approval process, which are relatively consistent with industry-wide practices, and La Trobe Financial's servicing quality.
  • That the transaction's cash flows can meet timely payment of interest and ultimate payment of principal to the noteholders under the rating stresses. Key factors are the level of subordination provided, the condition that a minimum margin will be maintained on the assets, an amortizing liquidity facility sized at 1.5% of the note balance, the principal draw function, the trapping of excess spread in the yield reserve, the retention amount built from excess spread before the call date, the amortization amount built from excess spread after the call date or upon a servicer default, and the provision of an extraordinary expense reserve. All rating stresses are made on the basis that the trust does not call the notes at or beyond the call date, and that all rated notes must be fully redeemed via the principal waterfall mechanism under the transaction documents.
  • That we also have factored into our ratings the legal structure of the trust, which has been established as a special-purpose entity and meets our criteria for insolvency remoteness.
  • The counterparty support provided by National Australia Bank Ltd. as liquidity facility provider and Commonwealth Bank of Australia as bank account provider. The transaction documents for the liquidity facility and bank accounts include downgrade language consistent with our " Counterparty Risk Framework: Methodology And Assumptions" criteria, published on March 8, 2019, that requires the replacement of the counterparty or other remedy, should its rating fall below the applicable rating.
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