04.12.2012 05:31
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Moody's assigns provisional ratings to Australian ABS issued by Crusade Series 2012-1 Trust

AUD 726.5 million of debt securities rated

Sydney, December 04, 2012 -- Moody's Investors Service has assigned provisional ratings to notes issued by Perpetual Corporate Trust Limited as trustee of the Crusade ABS Series 2012-1 Trust.

Issuer: Crusade ABS Series 2012-1 Trust

...AUD 637.50 million Class A Notes, Assigned (P)Aaa (sf);

...AUD 37.50 million Class B Notes, Assigned (P)Aa2 (sf);

...AUD 22.50 million Class C Notes, Assigned (P)A2 (sf);

...AUD 15.00 million Class D Notes, Assigned (P)Baa2 (sf);

...AUD 14.00 million Class E Notes, Assigned (P)Ba1 (sf).

The AUD 23.5 million Seller Notes are not rated by Moody's.

This is an Australian prime ABS transaction -- a cash securitisation of receivables extended to obligors located in Australia. The transaction has a substitution period of 12 months, subject to certain amortisation triggers and portfolio parameters. The portfolio consists of consumer finance, commercial hire purchase, goods loan (chattel mortgage) and finance lease receivables secured by motor vehicles. All receivables were originated by St. George Finance Limited ("St. George") a wholly owned subsidiary of Westpac Banking Corporation ("Westpac"). This is St. George's fourth auto ABS transaction and the first since merging with Westpac.

The ratings address the expected loss posed to investors by the legal final maturity. The structure allows for timely payment of interest and ultimate payment of principal by the legal final maturity.

RATINGS RATIONALE

Crusade Series 2012-1 Trust is similar to structures seen in previous Crusade transactions sponsored by St. George. A notable feature of this transaction is the 12 month substitution period.

The portfolio includes a high percentage of loans to retail consumer obligors (66%). The transaction is exclusively backed by motor vehicles, predominantly passenger vehicles. Motor vehicles exhibit less pro-cyclical default patterns and, on average, higher recovery rates. As a result, Moody's views the Crusade ABS Series 2012-1 Trust portfolio as exhibiting similar characteristics to peer portfolios.

In order to fund the purchase price of the portfolio, the Trust will issue six classes of notes. The notes will be repaid on a sequential basis in the initial stages (until the subordination percentage increases from the initial 15% to 19%), and during the tail end of the transaction. At all other times, the structure will follow a pro rata repayment profile, subject to certain performance criteria such as no unreimbursed charge-offs on any class of note. This principal paydown structure is comparable to other structures in the Australian ABS market in recent years.

The substitution period is a feature not commonly seen within Australian term ABS transactions. The substitution (revolving) period of 12 months from closing allows available principal to be used to purchase additional receivables to replenish the pool.

The substitution period is subject to certain performance triggers which, if breached, will stop the Trustee from purchasing further receivables. These include, amongst others:

o charge-offs exceed 1% of the aggregate initial principal balance of all Notes;

o average 90 days delinquencies over the immediately prior 12 months is not greater than 3%.

During the substitution period, the Trustee may only purchase receivables to the extent they comply with the eligibility criteria and if, after the purchase, the portfolio continues to comply with the portfolio parameters. The portfolio parameters minimise the possibility of major deviation from the characteristics of the initial portfolio and include:

o the aggregate principal balance of receivables with balloon payments exceeding 55% must not exceed 5% of the aggregate principal balance of all receivables;

o the aggregate principal balance of receivables with a remaining term greater than 60 months must not exceed 15% of the aggregate principal balance of all receivables;

o the aggregate principal balance of receivables with a principal balance exceeding $150,000 must not exceed 1.5% of the aggregate principal balance of all receivables;

o the aggregate principal balance of receivables with balloon repayments must not exceed 35% of the aggregate principal balance of all receivables;

o the weighted average balloon percentage of receivables (which have a balloon payment) must not exceed 30%, based on the balloon percentage at origination and weighted by the current balance of the receivables; and

o the aggregate principal balance of consumer finance receivables must not exceed 75% of the aggregate principal balance of all receivables.

Moody's has assessed the impact of the substitution period on the credit quality of the portfolio and transaction structure. We have considered, amongst others, the effect on timing of defaults for receivables being sold into the trust during the substitution period, given the seasoned nature of the original portfolio. We have also considered the possible increase in default probability, to the extent receivables relating to poorer performing contract types may be sold into the trust during the substitution period.

Finally, if Westpac doesn't utilise all the monthly principal collections to purchase additional receivables, they may hold the monthly collections up to an amount equal to 25% of the initial note balance in cash. Given that such cash will not be included as part of the interest rate swap, we have factored into our analysis the possible negative carry that may arise during the substitution period.

Moody's base case assumptions are a default rate of 2.75% and a recovery rate of 30%. These imply a expected (net) loss of 1.93%. Both the default rate and the recovery rate have been stressed relative to observed historical levels of 2.2% and 42% respectively.

VOLATILITY ASSUMPTION SCORES AND PARAMETER SENSITIVITIES

The V Score for this transaction is Low/Medium, which is in line with the score assigned for the Australian ABS sector. Among other factors, we note the availability of a substantial amount of historical performance data in the Australian ABS market as well as on an issuer-by-issuer basis. Here, for instance, we have been provided with detailed vintage and individual default data for the 2001-2012 period. In addition, we observe that Australian auto ABS, and specifically past Crusade transactions, have to date been performing stably. Overall, the V score of Low/Medium allows Moody's to have a material degree of comfort with regard to assumptions made in rating the Crusade Series 2012-1 Trust.

V Scores are a relative assessment of the quality of available credit information and of the degree of uncertainty around various assumptions used in determining the rating. High variability in key assumptions could expose a rating to more likelihood of rating changes. The V Score has been assigned accordingly to the report "V Scores and Parameter Sensitivities in the Asia/Pacific RMBS Sector", published in March 2009. Parameter Sensitivities are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process - here, the expected loss and the Aaa credit enhancement - differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint.

In the case of Crusade Series 2012-1 Trust, the model indicated rating for the Class A Notes remain investment grade when the default rate rises to 5.5% (double of our assumption of 2.75%) and recovery rates are reduced to 15% (half of our assumption of 30%); the model indicated rating for the Class A Notes drops 6 notches to A3. The model indicated ratings for the Class B notes drop 8 notches to Ba1 in the above scenario.

RATING METHODOLOGY

The principal methodology used in this rating was "Moody's Approach to Rating Australian Asset-Backed Securities" published in July 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology .

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rated entity has not informed Moody's whether the issuer is publicly disclosing all relevant information about the product.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF302208.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Dylan Bourke Associate Analyst Structured Finance Group Moody's Investors Service Pty. Ltd. Level 10 1 O'Connell Street Sydney NSW 2000 Australia JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 Jennifer Wu VP - Senior Credit Officer Structured Finance Group JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 Releasing Office: Moody's Investors Service Pty. Ltd. Level 10 1 O'Connell Street Sydney NSW 2000 Australia JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.

Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.

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