S&P: PUMA Masterfund S-8 Class B Notes Rating Lowered; Class AB Notes Affirmed

S&P Global Ratings today lowered its rating on the class B prime residential mortgage-backed securities (RMBS) issued by Perpetual Ltd. as trustee for PUMA Masterfund S-8. At the same time, we affirmed our rating on the class AB notes (see list).

Our rating on the class B notes reflects:The class B notes' reliance on the transaction's ability to produce excess spread, because there is zero credit support provided to the notes via subordination. The high level of arrears for the transaction. Some 7.7% of the pool is currently more than 30 days in arrears. That of the loans in arrears, 4.2% are more than 90 days in arrears. We view the high arrears and class B notes' reliance on the performance of the underlying collateral to produce excess spread for the transaction further increases the class B notes' vulnerability. The transaction is 100% covered by lenders' mortgage insurance (LMI) by QBE Lenders' Mortgage Insurance Ltd. and Genworth Financial Mortgage Insurance Pty Ltd. Both mortgage insurers have a current rating of 'A+'. Our analysis considers the LMI provider's ability to cover losses in the underlying collateral and Macquarie Securitisation Ltd.'s LMI claims history, which we view to be in line with industry standards. We therefore believe our rating on the class B notes reflects the support provided by the insurers to cover losses that could occur.

Our rating on the class AB notes reflects:The credit support provided to the class AB notes in the form of subordinated class B notes is greater than the credit support required under our analysis. The ability of the class AB notes to pass various scenarios in our cash-flow modeling at the 'AAA (sf)' rating level. The relatively low weighted-average loan-to-value ratio of the underlying collateral pool, at 62.4%. Also, the weighted-average seasoning of the pool is high, at about 12.2 years. The pool factor is 11.47%, as of Dec. 31, 2017. The transaction has a 10% call option in place. PUMA transactions historically have called at this point. S&P Global Ratings' rating analysis does not assume transactions will be called, and considers the legal final maturity of the transaction.

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