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Pepper Residential Securities Trust No.21 RMBS Assigned Preliminary Ratings

          MELBOURNE (S&P Global Ratings) July 23, 2018--S&P Global Ratings today assigned its preliminary ratings to nine classes of nonconforming and prime residential mortgage-backed securities (RMBS) to be issued by Permanent Custodians Ltd. as trustee of Pepper Residential Securities Trust No.21 (see list). Pepper Residential Securities Trust No.21 is a securitization of nonconforming and prime residential mortgages originated by Pepper HomeLoans Pty Ltd.
          The preliminary ratings reflect:
          - Our view of the credit risk of the underlying collateral portfolio, including our view that the credit support is sufficient to withstand the stresses we apply. The credit support for the rated notes comprises note subordination. Subordination provided to the 'AAA (sf)' rated notes is in excess in our opinion of the minimum 'AAA (sf)' level of credit support.
          - The underwriting standard and centralized approval process of the seller, Pepper Homeloans.
          - The availability of a retention amount, amortization amount, and yield reserve, which will all be funded by excess spread, but at various stages of the transaction's term. They will have separate functions and timeframes, including reducing the balance of senior notes, reducing the balance of the most subordinated notes, and paying senior expenses and interest shortfalls on the class A notes.
          - Our expectation that the various mechanisms to support liquidity within the transaction, including a liquidity facility equal to 2.5% of the outstanding balance of the notes, and principal draws, are sufficient under our stress assumptions to ensure timely payment of interest.
          - The condition that a minimum margin will be maintained on the assets.
          - The benefit of a cross-currency swap to hedge the mismatch between the Australian dollar receipts from the underlying assets and the U.S. dollar payments on the class A1-u notes.
          A copy of S&P Global Ratings' complete report for Pepper Residential Securities Trust No.21 can be found on RatingsDirect, S&P Global Ratings' web-based credit analysis system, at http://www.capitaliq.com.
          The issuer has not informed S&P Global Ratings Australia Pty Ltd. whether the issuer is publically disclosing all relevant information about the structured finance instruments that are subject to this rating report or whether relevant information remains non-public.