Fitch Ratings has affirmed the ratings on four note classes from Pepper Asset Finance Revolver No. 2 Trust.

The Outlook is Stable.

The revolving transaction is backed by first-ranking Australian automotive and equipment lease and loan receivables originated by Pepper Asset Finance Pty Limited, a subsidiary of Pepper Money Limited. The notes were issued by BNY Trust Company of Australia Limited as trustee for Pepper Asset Finance Revolver No. 2 Trust.

RATING ACTIONS

Entity / Debt

Rating

Prior

Pepper Asset Finance Revolver No. 2 Trust

2

LT

Asf

Affirmed

Asf

3

LT

BBBsf

Affirmed

BBBsf

4 AU3FN0073227

LT

BBsf

Affirmed

BBsf

5 AU3FN0073235

LT

Bsf

Affirmed

Bsf

Page

of 1

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Stable Historical Performance and Collateral Characteristics: Performance of the underlying assets has been in line with Fitch's base-case expectations. The transaction's 30+ and 60+ day arrears as of end-September 2023 were 1.3% and 0.7%, respectively. These are in line with Fitch's 2Q23 Dinkum ABS Index 30+ and 60+ arrears of 1.17% and 0.57%, respectively.

The transaction is still within its revolving period, which ends December 2024. The receivables in the transaction pool are subject to eligibility criteria, and excess concentration parameters that limit the pool's concentration in loan products, asset types, obligors, geographic exposure, and various asset characteristics. Portfolio-specific default and recovery base-case expectations were based primarily on originator-specific data, but also consider the economic outlook, market and peer comparison data and the revolving period for the transaction.

Tight Labour Market Supports Outlook: Performance is supported by Australia's continued economic growth and tight labour market, despite interest rates increasing from May 2022 to June 2023. GDP growth in the year to June 2023 was 2.1% and unemployment was 3.6% in September 2023. We expect GDP growth to moderate to 1.7% for the full year before slowing to 1.5% in 2024, with unemployment at 3.8% increasing to 4.2% next year. This reflects our expectation of the impact on Australia's economy from China's property downturn in 2024 and lagged effects of tighter monetary policy on consumption.

Credit Enhancement Supports Rating: Credit enhancement is sufficient to support the notes' current rating levels. Cash flow analysis was not performed for the transaction, as none of the variables affecting transaction performance have changed beyond that expected since the last rating action and documented credit enhancement levels are unchanged.

Low Operational and Servicing Risk: All receivables are originated by Pepper Asset Finance, which demonstrated adequate capability as originator, underwriter and servicer. Pepper is not rated by Fitch. Servicer disruption risk is mitigated by back-up servicing arrangements. The nominated backup servicer is BNY Trust Company of Australia 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 and equipment lenders.

The key rating drivers listed in the applicable sector criteria, but not mentioned above, are not material to this rating action.

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 the credit enhancement available to the notes.

Downgrade Sensitivities

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.

For Fitch's previous rating sensitivities, please see Fitch Assigns Final Ratings to Pepper Asset Finance Revolver No. 2 Trust, published 8 December 2022.

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

Macroeconomic conditions, collateral performance and credit losses that are better than Fitch's baseline scenario or sufficient build-up of credit enhancement that would fully compensate for the credit losses and cash flow stresses commensurate with higher rating scenarios, all else being equal.

Upgrade Sensitivities

For Fitch's previous rating sensitivities, please see Fitch Assigns Final Ratings to Pepper Asset Finance Revolver No. 2 Trust.

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 has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information as part of its ongoing monitoring.

Prior to the transaction closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was made available to Fitch for this transaction.

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.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Additional information is available on www.fitchratings.com

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