Pepper I-Prime 2019-1 Trust Prime RMBS Assigned Ratings

MELBOURNE (S&P Global Ratings) April 17, 2019--S&P Global Ratings today 
assigned its ratings to eight classes of prime residential mortgage-backed 
securities (RMBS) issued by Permanent Custodians Ltd. as trustee of Pepper 
I-Prime 2019-1 Trust (see list). Pepper I-Prime 2019-1 Trust is a 
securitization of prime residential mortgages originated by Pepper HomeLoans 
Pty Ltd.

The 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.
  • The underwriting standard and centralized approval process of the seller, Pepper HomeLoans.
  • The availability of a yield-enhancement reserve, amortization reserve, and overcollateralization amount, which will all be funded by excess spread to cover potential yield shortfalls and loss reimbursements and to repay principal on the notes at various stages of the transaction's term.
  • The extraordinary expense reserve of A$250,000, funded by Pepper on or before closing, available to meet extraordinary expenses. The reserve will be topped up via excess spread if drawn.
  • Our expectation that the various mechanisms to support liquidity within the transaction, including a liquidity facility equal to 2.2% of the outstanding balance of the notes, and principal draws, are sufficient under our stress assumptions to ensure timely payment of interest.
  • 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-u notes.
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