Liberty Series 2015-1 SME Ratings Raised On Five Note Two Affirmed

Stocks and Financial Services Press Releases Tuesday September 12, 2017 17:19
MELBOURNE--12 Sep--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Sept. 12, 2017--S&P Global Ratings today raised its ratings on five classes of small-ticket commercial mortgage-backed, floating-rate, pass-through notes issued by Liberty Funding Pty Ltd. in respect of Liberty Series 2015-1 SME. At the same time, we affirmed our ratings on two classes of notes (see list).

Liberty Series 2015-1 SME is a securitization of loans to commercial borrowers, secured by first-registered mortgages over Australian commercial or residential properties originated by Liberty Financial Pty Ltd.

The ratings reflect: Our view of the credit risk of the underlying collateral portfolio and the credit support provided for the rated notes, which is commensurate with that credit risk.

Our analysis of credit risk is based on our " Principles Of Credit Ratings" criteria; however, where factors that affect borrower performance are similar to those for residential mortgage loans, we have applied similar assumptions (refer to Liberty Series 2015-1 SME, published Sept. 15, 2015).

Credit support for the rated notes is provided in the form of subordination.

The transaction has continued to pay down sequentially since close, increasing the level of subordination to all rated note classes. The class A1 and class A2 notes have subordination in excess of 2.5 times the assessed level of credit support.

The transaction benefits from a number of structural mechanisms, including a liquidity facility that is equal to 3.0% of the outstanding balance of notes, with a floor of A$750,000.
The transaction also benefits from a A$1,000,000 guarantee fee reserve account funded at close. The reserve can be used to cover current losses or used as liquidity support for required payments.
The underlying pool of assets has weighted-average seasoning of 49 months and a weighted-average current loan-to-value ratio of 61.1%.
The asset pool consists of 679 consolidated loans as of July 31, 2017, with pool composition consisting primarily of assets backed by residential property (54.4%) and commercial property (40.4%).

Arrears are currently tracking within our expectations, with loans more than 90 days in arrears equating to 1.5% of the current pool as of July 31, 2017. No loans were in arrears at transaction close.Approximately 45.7% of the pool is interest-only. Of this amount, 15.0% are bullet loans, with the final bullet loan scheduled to mature in 2021.

The transaction passes our stressed cash-flow modeling scenarios at the rating levels, having the ability to make timely interest and ultimate payment of principal.

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