OREANDA-NEWS. Fitch Ratings has assigned final ratings to Flexi ABS Trust 2015-1 commercial finance receivables-backed floating-rate notes. The issuance consists of notes backed by unsecured commercial equipment lease receivables originated by Flexirent Capital Pty Limited (Flexi). The ratings are as follows:

AUD157.5m Class A notes: 'AAAsf'; Outlook Stable
AUD12.6m Class B notes: 'AAsf'; Outlook Stable
AUD12.6m Class C notes: 'Asf'; Outlook Stable
AUD6.3m Class D notes: 'BBBsf'; Outlook Stable
AUD8.4m Class E notes: 'BBsf'; Outlook Stable
AUD12.6m Class F notes: not rated

The notes were issued by Perpetual Corporate Trust Limited in its capacity as trustee of Flexi ABS Trust 2015-1.

At the cut-off date, the total collateral pool consisted of 12,990 contracts totalling approximately AUD207m, with an average contract size of AUD15, 938. The pool comprises loan receivables originated by Flexirent Capital Pty Limited (Flexi), a subsidiary of FlexiGroup Limited. All receivables are amortising principal and interest operating leases and finance loans with no residual value at maturity of each of the contracts in the pool. The highest concentrations by equipment type in the pool collectively, are printers, copiers, faxes (24%) and fitness equipment (13.4%). The pool contains full service loan contracts that are subject to equipment maintenance (19.8%), while the largest obligor exposure makes up 1.5% of the total portfolio size.

The transaction also benefits from a diversification of a large number of predominantly small to medium sized business borrowers. The pool contains a wide range of vendors supplying predominantly office and business-critical equipment.

KEY RATING DRIVERS
Experienced Originator: Flexi is a provider of retail point-of-sale consumer finance, vendor and commercial leasing, interest-free credit cards and mobile broadband and payment services. Flexi provides operating and finance leases predominantly to small and medium sized businesses across Australia through its divisions, FlexiCommercial and FlexiEnterprise. Flexi is listed on the Australian Stock Exchange, and has a market capitalisation of more than AUD1bn.

Diverse and Granular Portfolio: The portfolio consists of finance receivables predominantly originated by Flexi to a geographically diversified pool of Australian business customers. The pool consists of fully amortising operating and finance lease receivables, with a contract size averaging AUD15,938, while the weighted-average (WA) remaining term is 38 months.

Steady Track Record: Historical loss rates have been stable; however, limited performance history exists for the largest product types by volume contained within the portfolio, with many contracts yet to complete a full cycle.

Transaction Support Features: A liquidity reserve, funded by proceeds from issuance, will ensure stable cash flows for all rated notes and trust expenses. A derivative reserve account will be established to set aside any voluntary prepayments made by borrowers, to ensure sufficient income is available to cover future swap payments. Commingling risk associated with vendors collecting and holding funds on behalf of Flexi that fail to remit collections when due, is addressed through the collections reserve account, which will be funded by Flexi at closing.

Availability of Excess Spread: Initial Class A credit enhancement is 25% with no credit to excess spread. The ratings on the other notes give credit to excess spread.

No Residual Value Risk: All securitised loans are fully amortising so that there is no exposure to residual value risk to the trust.

Flexi were able to provide Fitch with at least 11 years' worth of historical performance data, however limited depth exists in terms of the amount of performance data available for assets originated through the FlexiComercial division of FlexiGroup. A large proportion of the originations in this segment of the business have yet to run their full term, therefore, Fitch has had to adopt a conservative approach when assigning a base case for this product.

RATING SENSITIVITIES 
Unexpected increases in the frequency of foreclosures on defaulted loans could produce loss levels higher than Fitch's base case, which could in turn result in negative rating actions on the notes. Fitch has evaluated the sensitivity of the ratings assigned to Flexi ABS Trust 2015-1 to increased gross default levels over the life of the transaction.

Its analysis found that the ratings of the Class D and E notes were susceptible to downgrades under Fitch's mild default scenarios (10% increase), as these notes are most reliant upon excess spread for credit support, while the Class C notes were susceptible to the moderate scenarios (25% increase). All classes were susceptible to severe default (50% increase) scenarios.

Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "Flexi ABS Trust 2015-1", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.