Fitch Ratings has assigned final ratings to RESIMAC Bastille Trust - RESIMAC Series 2023-1NC's mortgage-backed scheduled-amortisation and pass-through floating-rate notes.

The issuance consists of notes backed by a pool of Australian residential mortgage loans originated by RESIMAC Limited, of which 81.8% are conforming and 18.2% non-conforming. The notes have been issued by Perpetual Trustee Company Limited in its capacity as trustee of RESIMAC Bastille Trust - RESIMAC Series 2023-1NC.

RATING ACTIONS

Entity / Debt

Rating

Prior

RESIMAC Bastille Trust - RESIMAC Series 2023-1NC

A AU3FN0075826

LT

AAAsf

New Rating

AAA(EXP)sf

AB AU3FN0075834

LT

AAAsf

New Rating

AAA(EXP)sf

B AU3FN0075842

LT

NRsf

New Rating

NR(EXP)sf

C AU3FN0075859

LT

NRsf

New Rating

NR(EXP)sf

D AU3FN0075867

LT

NRsf

New Rating

NR(EXP)sf

E AU3FN0075875

LT

NRsf

New Rating

NR(EXP)sf

F AU3FN0075883

LT

NRsf

New Rating

NR(EXP)sf

G AU3FN0075891

LT

NRsf

New Rating

NR(EXP)sf

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

The collateral pool totalled AUD1 billion, up from AUD500 million at the time of the expected rating on 11 April 2023. The pool consisted of 1,509 obligors with a weighted-average (WA) current loan/value ratio (LVR) of 66.9% and a WA indexed current LVR of 70.0% at the 2 April 2023 cut-off date.

KEY RATING DRIVERS

Structural Credit Enhancement Mitigates 'AAAsf' Losses: The 'AAAsf' weighted-average foreclosure frequency (WAFF) of 19.1% is driven by the WA unindexed LVR of 66.9%, non-conforming loans under Fitch's methodology forming 18.2% of the pool, low-documentation loans accounting for 94.0%, Fitch-calculated self-employed and investment loans comprising 95.0% and 33.3%, respectively.

The 'AAAsf' lenders' mortgage insurance (LMI) dependent WA recovery rate (WARR) of 53.4% is driven by the portfolio's WA indexed scheduled LVR of 73.2% and LMI coverage of 0.2%. Classes A and AB benefit from credit enhancement of 30.0% and 17.0%, respectively. The 'AAAsf' portfolio loss of 8.9% is comparable with the AUD500 million expected rating pool of 8.8%.

Limited Liquidity Risk: Structural features include retention and amortisation amounts that redirect excess income to repay note principal and a liquidity facility sized at 1.5% of the class A to F invested note balance, with a floor of AUD1.5 million that is sufficient to mitigate Fitch's payment interruption risk. The class A and AB notes can withstand all relevant Fitch stresses applied in our cash flow analysis.

Low Operational Risk: RESIMAC is a non-bank financial institution, with a history dating back to 1985. Fitch has found that the operations of the originator and servicer were comparable with those of other Australian non-bank lenders.

Tight Labour Supports Outlook: 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 3.5% in March 2023. We expect GDP growth to slow to 1.5% in 2023, with unemployment reaching 4.2%, reflecting high inflation combined with a slowdown in consumer spending.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

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.

This section provides insight into the model-implied sensitivities the transaction faces when assumptions - WAFF or WARR - are modified, while holding others equal. The modelling process uses the modification of default and loss assumptions to reflect asset performance in up and down environments. The results below should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. Fitch modifies the recovery rate to isolate the effect of a change in recovery proceeds at the borrower level.

Fitch conducted sensitivity analysis by increasing gross default levels and decreasing recovery rates over the life of the transaction.

Downgrade Sensitivity:

Notes: A / AB

Rating: AAAsf / AAAsf

Increase defaults by 15%: AAAsf / AAAsf

Increase defaults by 30%: AAAsf / AAAsf

Reduce recoveries by 15%: AAAsf / AAAsf

Reduce recoveries by 30%: AAAsf / AAAsf

Increase defaults by 15% and reduce recoveries by 15%: AAAsf / AAAsf

Increase defaults by 30% and reduce recoveries by 30%: AAAsf / AA+sf

The transaction supports LMI-independent ratings for the class A and AB notes. LMI is not required to support the rating due to the level of credit support provided by the lower notes.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The rated notes are at the highest level on Fitch's scale and cannot be upgraded. As such, upgrade sensitivity scenarios 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

Fitch was provided with Form ABS Due Diligence-15E (Form 15E), as prepared by Deloitte Touche Tohmatsu. The third-party due diligence described in Form 15E focused on a comparison of certain characteristics with respect to sample loans. Fitch considered this information in its analysis and it did not have an effect on Fitch's analysis or conclusions.

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.

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.

Date of Relevant Committee

28 March 2023

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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