Fitch updates ratings for Bluestone Prime 2021-1 Trust

Announcement details key rating drivers

Fitch updates ratings for Bluestone Prime 2021-1 Trust

Bluestone Prime 2021-1 Trust has received its final ratings from Fitch Ratings (Fitch) for its mortgage-backed pass-through floating-rate notes.

Fitch has issued a final rating of class C notes, one notch higher than the expected rating assigned on July 16, 2021. It explained that it had issued a high rating due to the lower final weighted average (WA) note coupon increasing the excess spread available to the transaction.

Fitch’s final ratings for Bluestone Prime 2021-1 Trust’s entity include:

  • A1 AU3FN0061180: from AAA(EXP)sf to AAAsf;
  • A2 AU3FN0061198: from AAA(EXP)sf to AAAsf;
  • B AU3FN0061206: from AA(EXP)sf to AAsf;
  • C AU3FN0061214: from A(EXP)sf to A+sf;
  • D AU3FN0061222: from BBB+(EXP)sf to BBB+sf;
  • E AU3FN0061230: from BB+(EXP)sf to BB+sf;
  • F1: from NR(EXP)sf to NRsf; and
  • F2: from NR(EXP)sf to NRsf.

The final ratings include notes backed by first-ranking Australian prime residential full-documentation mortgage loans from Bluestone Group Pty Limited, Bluestone Mortgages Pty Limited (Bluestone), and Athena Home Loans Pty Limited. Permanent Custodians Limited issued the notes in its capacity as trustee of Bluestone Prime 2021-1 Trust, a separate and distinct trust created under a master trust deed.

Read more: Fitch Ratings releases new APAC residential mortgage rating criteria

Key rating drivers include sufficient credit enhancement, which mitigates expected “AAAsf” losses, limited liquidity risk, and originator adjustment applied due to limited historical performance data.

“Fitch undertook an operational review of both Bluestone and Athena and found that the operations of the originator and servicer were comparable with market standards,” Fitch said in a statement.

“We do not expect the servicer’s operations to be disrupted by the coronavirus pandemic as staff are able to work remotely and have access to the office. Fitch has applied a 5% increase to its base foreclosure frequency on the Athena-originated loans within the pool due to limited originator-specific performance data.”

According to Fitch, the factors that could result in positive ratings or upgrades (individually or collectively) include macroeconomic conditions, loan performance, and credit losses better than its baseline scenario, or sufficient build-up of credit enhancement that fully compensates for credit losses and cash flow stresses commensurate with higher rating scenarios – all else being equal.

Meanwhile, the factors that could lead to negative ratings or downgrades (individually or collectively) include a longer pandemic expected to deteriorate macroeconomic fundamentals and consumers’ financial position in Australia beyond Fitch’s baseline scenario. Available credit enhancement cannot compensate for higher credit losses and cash flow stresses – all else being equal.