Fitch Ratings has assigned final ratings to RESIMAC Bastille Trust - RESIMAC Series 2024-1NC's mortgage-backed pass-through floating-rate notes.

The issuance consists of notes backed by a pool of first-ranking Australian residential conforming and non-conforming 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 2024-1NC. This is a series-segregated trust created under a master trust deed.

RATING ACTIONS

Entity / Debt

Rating

Prior

RESIMAC Bastille Trust - RESIMAC Series 2024-1NC

A1 AU3FN0085759

LT

AAAsf

New Rating

AAA(EXP)sf

A2 AU3FN0085767

LT

AAAsf

New Rating

AAA(EXP)sf

AB AU3FN0085775

LT

AAAsf

New Rating

AAA(EXP)sf

B AU3FN0085783

LT

NRsf

New Rating

NR(EXP)sf

C AU3FN0085791

LT

NRsf

New Rating

NR(EXP)sf

D AU3FN0085809

LT

NRsf

New Rating

NR(EXP)sf

E AU3FN0085817

LT

NRsf

New Rating

NR(EXP)sf

F AU3FN0085825

LT

NRsf

New Rating

NR(EXP)sf

G AU3FN0085833

LT

NRsf

New Rating

NR(EXP)sf

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

The collateral pool totalled AUD750 million and consisted of 1,176 obligors, with a weighted-average (WA) current loan/value ratio (LVR) of 67.5% and a WA indexed current LVR of 62.6% as of the 21 March 2024 cut-off date.

KEY RATING DRIVERS

Sufficient Credit Enhancement Mitigates Expected 'AAAsf' Losses: The 'AAAsf' WA foreclosure frequency (WAFF) of 19.2% is driven by the WA unindexed LVR of 67.5%, non-conforming loans under Fitch's methodology forming 20.8% of the pool, low-documentation loans accounting for 91.8% and Fitch-calculated self-employed borrowers and investment loans making up 93.9% and 36.5%, respectively.

The 'AAAsf' lenders' mortgage insurance (LMI) dependent WA recovery rate (WARR) of 56.4% is driven by the portfolio's WA indexed scheduled LVR of 65.3%. The class A1 and A2 notes benefit from credit enhancement (CE) of 20.0% and AB notes 12.0%. The 'AAAsf' portfolio loss of 8.4% is lower than the 8.9% at expected rating.

Limited Liquidity Risk: The transaction benefits from a liquidity facility sized at 1.5% of the Class A1 to F invested note balance, with a floor of AUD1.125 million that is sufficient to mitigate Fitch's payment interruption risk. Other structural features include a retention amount with a AUD7.5 million limit that redirects excess income to repay note principal in reverse sequential order starting from the Class F notes, and a post call amortisation amount that distributes excess income to repay note principal in sequential order. 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 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: Portfolio performance is supported by Australia's continued economic growth and tight labour market, despite rapid interest rate hikes during 2022-2023. GDP growth in 2023 was 1.5% and unemployment was 3.7% in February 2024. Fitch expects economic conditions to stabilise in 2024, with GDP growth slowing slightly to 1.4% and unemployment rising to 4.2%. This reflects Fitch's anticipated effects of China's property downturn and the ongoing impact of recent monetary tightening on consumer spending.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Transaction performance may be affected by changes in market conditions and the economic environment. Weakening asset performance is strongly correlated with increasing delinquencies and defaults, which could reduce the CE 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 CE and remaining loss-coverage levels available to the notes. Decreased CE 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.

The rating sensitivity section provides insight into the model-implied sensitivities the transaction faces when assumptions - WAFF or WARR - are modified, while holding others equal. The modelling process uses the modification of default and loss assumptions to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors.

Note: A1 / A2 / AB

Final Rating: AAAsf / AAAsf / AAAsf

Increase defaults by 15%: AAAsf / AAAsf / AAAsf

Increase defaults by 30%: AAAsf / AAAsf / AA+sf

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 an LMI-independent rating for the A1, A2 and AB notes, as LMI is not required to support the rating due to the level of credit support provided by the lower notes.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The rated notes are at the highest level on Fitch's scale and cannot be upgraded. As such, upgrade sensitivity scenarios are not relevant.

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

Prior to the transaction closing, 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 the originator'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

22 March 2024

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

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Additional information is available on www.fitchratings.com

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