Press Release

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

Consumer Loans & Credit Cards

March 02, 2021

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

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 of the Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity dates in August 2031, March 2032, and September 2033 for Series 2017-2, Series 2018-1, and Series 2019-1, respectively.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, charge-offs, principal payment rates, and yield rates, as of the February 2021 payment date.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.
-- No revolving termination events have occurred.

The Issuer 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. The portfolio is serviced by Latitude. Each series is currently in its respective revolving period.

PORTFOLIO PERFORMANCE
As of the February 2021 payment date, the monthly principal payment rate (MPPR) was 12.2%, averaging 12.3% since closing. The annualised gross charge-off rate was 2.7%, averaging 4.6% since closing. The annualised yield rate was 12.4%, averaging 13.4% since closing.

As of February 2021, receivables that were two- to three-months in arrears represented 0.6% of the outstanding receivables balance, down from 0.8% in February 2020. Receivables more than three months in arrears represented 1.0% of the outstanding receivables balance, down from 1.3% in February 2020.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar maintained its base case MPPR, charge-off rate, and yield rate assumptions at 11.3%, 6.3%, and 12.5%, respectively, and considered portfolio-specific coronavirus adjustments in its analysis.

CREDIT ENHANCEMENT AND RESERVES
With respect to Series 2017-2, the Class A1 Notes 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 has 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 ratings assigned to the Class A1 and Class A2 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.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many ABS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.

For this transaction, DBRS Morningstar assessed a reduction in the expected yield rate, in addition to a reduction in the expected principal payment rate in line with historical sensitivity to unemployment rates.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 28 January 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/372842/global-macroeconomic-scenarios-january-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 8 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated ABS transactions in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/373262.

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” (8 February 2021).

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 at: http://www.dbrsmorningstar.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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/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 this transaction took place on 16 April 2020 when DBRS Morningstar discontinued its ratings of the Series 2017-1 Notes (Class A1, Class A2, Class B, Class C, Class D, and Class E Notes) issued by Latitude Australia Credit Card Loan Note Trust. Previously, on 2 March 2020, DBRS Morningstar confirmed its ratings of the Class A1, Class A2, Class B, Class C, Class D, and Class E Notes for each Series at AAA (sf), AAA (sf), AA (sf), A (f), BBB (sf), and BB (sf), respectively.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at www.dbrsmorningstar.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 2017-2:
-- Class A1: AAA (sf), AAA (sf), AAA (sf), AA (sf), AAA (sf), AA (low) (sf)
-- Class A2: AA (high) (sf), AA (low) (sf), AA (sf), BBB (sf), AA (sf), BBB (sf)
-- Class B: A (high) (sf), BBB (high) (sf), A (sf), BB (high) (sf), A (low) (sf), BB (high) (sf)
-- Class C: BBB (sf), BB (high) (sf), BBB (sf), B (high) (sf), BBB (sf), BB (low) (sf)
-- Class D: BB (sf), B (high) (sf), BB (sf), B (sf), BB (high) (sf), B (high) (sf)
-- Class E: B (sf), below B (sf), B (high) (sf), below B (sf), B (high) (sf), B (sf)

Series 2018-1:
-- Class A1: AAA (sf), AAA (sf), AAA (sf), AA (low) (sf), AAA (sf), A (high) (sf)
-- Class A2: AA (high) (sf), AA (low) (sf), AA (sf), BBB (sf), AA (sf), BBB (sf)
-- Class B: A (high) (sf), BBB (high) (sf), A (sf), BB (high) (sf), A (low) (sf), BB (high) (sf)
-- Class C: BBB (high) (sf), BB (high) (sf), BBB (sf), B (high) (sf), BBB (sf), BB (low) (sf)
-- Class D: BB (high) (sf), B (high) (sf), BB (sf), B (sf), BB (high) (sf), B (high) (sf)
-- Class E: B (high) (sf), below B (sf), B (high) (sf), below B (sf), B (high) (sf), 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) (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), 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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

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

DBRS Ratings Limited
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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.dbrsmorningstar.com/about/methodologies.

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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