Fitch Ratings has assigned expected ratings to Plenti Auto ABS Trust 2023-1's pass-through floating-rate notes.

The notes are backed by a pool of first-ranking Australian automotive loan receivables originated by Plenti Finance Pty Limited, a subsidiary of Plenti Group Limited (Plenti). The notes will be issued by Perpetual Corporate Trust Limited as trustee for Plenti Auto ABS Trust 2023-1.

RATING ACTIONS

Entity / Debt

Rating

Plenti Auto ABS Trust 2023-1

A AU3FN0078267

LT

AAA(EXP)sf

Expected Rating

A-X AU3FN0078275

LT

AAA(EXP)sf

Expected Rating

B1 AU3FN0078283

LT

NR(EXP)sf

Expected Rating

B2 AU3FN0078291

LT

NR(EXP)sf

Expected Rating

C AU3FN0078309

LT

NR(EXP)sf

Expected Rating

D AU3FN0078317

LT

NR(EXP)sf

Expected Rating

E AU3FN0078325

LT

NR(EXP)sf

Expected Rating

F AU3FN0078333

LT

NR(EXP)sf

Expected Rating

G1 AU3FN0078341

LT

NR(EXP)sf

Expected Rating

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

The total collateral pool at the 30 April 2023 cut-off date was AUD400 million and consisted of 10,605 receivables with weighted-average (WA) seasoning of 5.9 months, WA remaining maturity of 63.4 months and an average contract balance of AUD37,718.

KEY RATING DRIVERS

Stress Commensurate with Ratings: Fitch has assigned base-case default expectation for each consumer risk tier of 1.5%, 4.5% and 7.5% for tiers 1, 2 and 3, respectively, and 5.0% for commercial loans. Fitch has also assigned 'AAAsf' default multiples of 7.50x, 4.50x, 4.25x and 5.50x. The recovery base case is 30.0%, with a 'AAAsf' recovery haircut of 50.0% across all sub-categories. The weighted-average base-case default assumption is 2.5% and the 'AAAsf' default multiple is 5.9x.

Portfolio performance is supported by Australia's continued economic growth and tight labour market, despite increasing interest rates. GDP growth in 2022 was 2.7% and unemployment was 3.7% in April 2023. Fitch expects GDP growth to slow to 1.5% in 2023, with unemployment reaching 4.2%, reflecting high inflation combined with a slowdown in consumer spending.

Excess Spread Supports A-X Note Repayment: The transaction includes an A-X note to fund the purchase-price component of the unamortised commission paid to introducers for the origination of receivables. The note will not be collateralised, but will amortise in line with an amortisation schedule. The note's repayment limits the availability of excess spread to cover losses, as it ranks senior in the interest waterfall; above the class B to F notes.

Structural Risks Addressed: Counterparty risk is mitigated by documented structural mechanisms that ensure remedial action takes place should the ratings of the swap providers or transaction account bank fall below a certain level. Class A to F notes will receive principal repayments pro rata upon satisfaction of stepdown conditions. The percentage of credit enhancement provided by the G1 and G2 notes will increase as the A to F notes amortise.

Fitch's cash flow analysis incorporates the transaction's structural features and tests each note's robustness by stressing default and recovery rates, prepayments, interest-rate movements and default timing. The class A notes have passed the 'AAAsf' rating stresses.

Low Operational and Servicing Risk: All receivables were originated by Plenti Finance, which demonstrated adequate capability as originator, underwriter and servicer. Plenti is not rated by Fitch. Servicer disruption risk is mitigated by back-up servicing arrangements. The nominated back-up servicer is Perpetual Corporate Trust Limited. Fitch undertook an operational and file review and found that the operations of the originator and servicer were comparable with those of other auto lenders.

No Residual Value Risk: There is no residual value exposure in this transaction. However, 11.2% of the portfolio by loan count has balloon amounts payable at maturity.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Transaction performance may be affected by changes in market conditions and the economic environment. Weakening asset performance is strongly correlated with increasing levels of delinquencies and defaults that could reduce credit enhancement available to the notes.

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, and are likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis by stressing a transaction's initial base-case assumptions; these include increasing WA defaults and decreasing the WA recovery rate.

Downside Sensitivities

Note: A / A-x

Expected Rating: AAAsf / AAAsf

Increase defaults by 10%: AA+sf / AAAsf

Increase defaults by 25%: AA+sf / AAAsf

Increase defaults by 50%: AA-sf / AAAsf

Decrease recoveries by 10%: AAAsf / AAAsf

Decrease recoveries by 25%: AAAsf / AAAsf

Decrease recoveries by 50%: AAAsf / AAAsf

Combined increased defaults by 10% and decrease recoveries by 10%: AA+sf / AAAsf

Combined increased defaults by 25% and decrease recoveries by 25%: AAsf / AAAsf

Combined increased defaults by 50% and decrease recoveries by 50%: A+sf / AAAsf

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The class A and A-X notes are at the highest level on Fitch's scale and cannot be upgraded. Therefore, upgrade sensitivity stresses are not relevant.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

DATA ADEQUACY

Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis.

As part of its ongoing monitoring, Fitch reviewed a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis, according to its applicable rating methodologies, indicates that it is adequately reliable.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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