OREANDA-NEWS. Fitch Ratings has assigned expected ratings to Series 2013-1 REDS Trust's (REDS 2013-1) class A2-R mortgage-backed floating-rate notes. The transaction is a securitisation of first-ranking Australian residential mortgages originated by Bank of Queensland (A-/Stable/F2).The ratings are as follows:

AUD170m Class A2-R notes: 'AAAsf(EXP)'; Outlook Stable.

The class A2-R notes are being issued to refinance the soft-bullet class A2 notes on 22 August 2016. The class A2 notes will be repaid from the proposed issuance of the class A2-R notes, as the principal reserve balance was zero at the payment date in July 2016.

The class A2 notes were originally issued in August 2013 as part of an AUD850m RMBS issue by Bank of Queensland. The notes' refinance was contemplated in the original issuance. The transaction continues to perform in line with Fitch's expectations at origination and has paid down from AUD850m to approximately AUD423m since issuance.

Ratings for the remaining rated notes are unchanged and were affirmed on 22 February 2016 as follows (note balances as at January 2016):

AUD244.4m Class A1 (ISIN AU0000RDIHA7) 'AAAsf'; Outlook Stable; and

AUD170.0m Class A2 (ISIN AU0000RDIHB5) 'AAAsf'; Outlook Stable.

The class A2-R notes will be issued by Perpetual Trustee Company Limited in its capacity as trustee of REDS 2013-1.

KEY RATING DRIVERS

The 'AAAsf(EXP)' rating assigned to the class A2-R notes is supported by the credit enhancement provided by the subordinate class AB, B1 and B2 notes; the liquidity facility, which is equivalent to 1.9% of the outstanding note balance; and Bank of Queensland's mortgage underwriting and servicing capabilities.

EXPECTED RATING SENSITIVITIES

The class A-2R notes are independent of lenders' mortgage insurance. Unexpected decreases in residential property value, increases in the frequency of foreclosures and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base-case, which could in turn result in negative rating action on the notes.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by Bank of Queensland compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.

A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the links given under Related Research below.