DBRS Morningstar Confirms Ratings of Latitude Australia Credit Card Loan Note Trust

DBRS Ratings Limited (DBRS Morningstar) confirmed its ratings of the Series 2017-1, Series 2017-2, Series 2018-1, and Series 2019-1 Notes (the Notes) issued by Latitude Australia Credit Card Loan Note Trust (the Issuer) as follows:

Series 2017-1:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)

Series 2017-2:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)

Series 2018-1:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)

Series 2019-1:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, charge-off rates, principal payment rates, and yield rates;
-- The ability to withstand stressed cashflow assumptions;
-- No purchase termination events have occurred;
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
Latitude Australia Credit Card Loan Note Trust is a securitisation of credit card receivables related to credit agreements originated or acquired by Latitude Finance Australia (Latitude) to customers in Australia and assigned to the Latitude Australia Credit Card Master Trust. Each series is currently in its respective revolving period.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of January 2020, the monthly principal payment rate (MPPR) was 12.7%, the annualised gross charge-off rate was 4.2%, and the annualised yield rate was 12.6%. DBRS Morningstar maintained its base case MPPR, charge-off rate, and yield assumptions at 11.3%, 6.3% and 12.5%, respectively.

As of January 2020, loans that were two- to three-months in arrears represented 0.8% of the outstanding receivables balance, unchanged from January 2019. Receivables more than three months in arrears represented 1.3% of the outstanding receivables balance, down from 1.4% in January 2019.

CREDIT ENHANCEMENT AND RESERVES
With respect to Series 2017-1 and Series 2017-2, the Class A1 Notes each benefit from credit enhancement of 34.5%. With respect to Series 2018-1 and 2019-1, the Class A1 Notes each benefit from credit enhancement of 32.5%. Credit enhancement to the Class A2, Class B, Class C, Class D, and Class E Notes is 22.5%, 17.0%, 12.0%, 8.0% and 4.5%, respectively, for all series. Credit enhancement consists of subordination of the junior notes and the series-specific Originator variable funding note (VFN), and remained stable due to the revolving periods.

The Required Retained Principal Ledgers in respect of each series and the Originator VFN Required Retained Principal Ledger provide liquidity support to the transaction. The Series Required Retained Principal Ledger is funded to 1% of the outstanding Notes balance.

Westpac Banking Corporation (Westpac) acts as the account bank for the transaction. Based on the account bank reference rating of Westpac at AA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes for each series, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in its proprietary cash flow engine.

Notes:
All figures are in Australian dollars unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by Latitude Financial Services.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on Series 2017-1, Series 2017-2 and Series 2018-1 took place on 5 March 2019 when DBRS Morningstar confirmed its ratings of the Class A1, Class A2, Class B, Class C, Class D and Class E Notes at AAA (sf), AAA (sf), AA (sf), A (sf), BBB (sf) and BB (sf), respectively. The last rating action on Series 2019-1 took place on 16 September 2019 when DBRS Morningstar finalised its provisional ratings of the Class A1, Class A2, Class B, Class C, Class D and Class E Notes at AAA (sf), AAA (sf), AA (sf), A (sf), BBB (sf) and BB (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):
-- Base Case Charge-Off Rate: 6.3%
-- Base Case MPPR: 11.3%
-- Base Case Yield Rate: 12.5%

-- Scenario 1: 25% increase in charge-off, 25% decrease in yield
-- Scenario 2: 50% increase in charge-off, 50% decrease in yield
-- Scenario 3: 25% decrease in MPPR, 25% decrease in yield
-- Scenario 4: 50% decrease in MPPR, 50% decrease in yield
-- Scenario 5: 25% decrease in MPPR, 25% increase in charge-off
-- Scenario 6: 50% decrease in MPPR, 50% increase in charge-off

Series 2017-1:
-- Class A1: AAA (sf), AAA (sf), AAA (sf), AA (low) (sf), AAA (sf), BBB (high) (sf)
-- Class A2: AA (sf), A (high) (sf), AA (low) (sf), BBB (low) (sf), AA (low) (sf), BBB (low) (sf)
-- Class B: A (sf), BBB (sf), BBB (high) (sf), BB (low) (sf), BBB (high) (sf), BB (sf)
-- Class C: BBB (low) (sf), BB (sf), BBB (low) (sf), B (sf), BBB (low) (sf), BB (low) (sf)
-- Class D: BB (low) (sf), B (sf), BB (low) (sf), below B (sf), BB (low) (sf), B (sf)
-- Class E: B (sf), below B (sf), B (sf), below B (sf), B (sf), below B (sf)

Series 2017-2:
-- Class A1: AAA (sf), AAA (sf), AAA (sf), AA (low) (sf), AAA (sf), A (high) (sf)
-- Class A2: AA (sf), A (high) (sf), AA (low) (sf), BBB (low) (sf), AA (low) (sf), BBB (low) (sf)
-- Class B: A (sf), BBB (sf), A (low) (sf), BB (sf), BBB (high) (sf), BB (high) (sf)
-- Class C: BBB (low) (sf), BB (sf), BBB (low) (sf), B (sf), BBB (low) (sf), BB (low) (sf)
-- Class D: BB (low) (sf), B (sf), BB (low) (sf), below B (sf), BB (sf), B (sf)
-- Class E: B (sf), below B (sf), B (sf), below B (sf), B (sf), below B (sf)

Series 2018-1:
-- Class A1: AAA (sf), AAA (sf), AAA (sf), A (high) (sf), AAA (sf), A (high) (sf)
-- Class A2: AA (high) (sf), A (high) (sf), AA (sf), BBB (low) (sf), AA (low) (sf), BBB (low) (sf)
-- Class B: A (sf), BBB (sf), A (low) (sf), BB (sf), BBB (high) (sf), BB (high) (sf)
-- Class C: BBB (sf), BB (sf), BBB (low) (sf), B (high) (sf), BBB (low) (sf), BB (low) (sf)
-- Class D: BB (sf), B (sf), BB (low) (sf), below B (sf), BB (sf), below B (sf)
-- Class E: B (sf), below B (sf), B (sf), below B (sf), B (high) (sf), below B (sf)

Series 2019-1:
-- Class A1: AAA (sf), AAA (sf), AAA (sf), A (high) (sf), AAA (sf), A (high) (sf)
-- Class A2: AA (high) (sf), A (high) (sf), AA (sf), BBB (low) (sf), AA (low) (sf), BBB (low) (sf)
-- Class B: A (sf), BBB (sf), A (low) (sf), BB (sf), A (low), BB (high) (sf)
-- Class C: BBB (sf), BB (sf), BBB (low) (sf), B (high) (sf), BBB (low) (sf), BB (low) (sf)
-- Class D: BB (sf), B (sf), BB (low) (sf), below B (sf), BB (sf), B (sf)
-- Class E: B (sf), below B (sf), B (sf), below B (sf), B (high) (sf), below B (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Clare Wootton, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
-- Series 2017-1: 6 March 2017
-- Series 2017-2: 18 August 2017
-- Series 2018-1: 6 March 2018
-- Series 2019-1: 2 September 2019

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London
EC3M 3BY
United Kingdom

Registered and incorporated under the laws of England and Wales: Company No. 7139960.

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].