Rating Action: Moody’s assigns provisional ratings to Shift’s inaugural commercial equipment loan ABS transactionGlobal Credit Research – 24 Feb 2022Shift 2022-1PP Trust — AUD142.8 million of debt securities ratedSydney, February 24, 2022 — Moody’s Investors Service has assigned provisional ratings to notes to be issued by BNY Trust Company of Australia Ltd, as trustee of Shift 2022-1PP Trust.”IMPORTANT NOTICE: MOODY’S RATINGS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS. SUCH USE WOULD BE RECKLESS AND INAPPROPRIATE. SEE FULL DISCLAIMERS BELOW.”Issuer: Shift 2022-1PP Trust….AUD97.50 million Class A Notes, Assigned (P)Aaa (sf)….AUD15.60 million Class B Notes, Assigned (P)Aa2 (sf)….AUD9.00 million Class C Notes, Assigned (P)A2 (sf)….AUD6.60 million Class D Notes, Assigned (P)Baa2 (sf)….AUD9.30 million Class E Notes, Assigned (P)Ba2 (sf)….AUD4.80 million Class F Notes, Assigned (P)B2 (sf)The AUD7.20 million of Class G Notes are not rated by Moody’s.The transaction is a securitisation of a portfolio of commercial auto and equipment loans and leases originated by Shift Financial Pty Ltd (“Shift”, formally known as Get Capital Pty Ltd, unrated). Shift will act as servicer of the transaction. This is Shift’s inaugural ABS transaction.Shift is an Australian SME lender providing working capital facilities, term loans and asset finance to Australian businesses since 2014. As of 31 December 2021 Shift has lent circa AUD1.2 billion to over 60,000 Australian businesses.RATINGS RATIONALEThe provisional ratings take into account, among other factors, Moody’s evaluation of the underlying receivables and their expected performance, an evaluation of the capital structure and credit enhancement provided to the notes, the availability of excess spread over the life of the transaction, the liquidity facility in the amount of 1.5% of the rated notes’ balance, the legal structure, the experience of Shift as servicer; and the presence of BNY Trust Company of Australia Ltd as a standby servicer.According to Moody’s, the transaction benefits from the high level of excess spread available to cover losses arising from the portfolio. The key challenge in the transaction is the limited historical data available for the portfolio. Shift is a relatively new originator, with historical default data for its auto and equipment commercial loan book only available from 2016 and for its unsecured business loans and line-of-credit facilites from 2015. As such, the pool’s performance could be subject to greater variability than the observed data indicates.The transaction’s key features are as follows:- Initially, the Class A, Class B, Class C, Class D, Class E and Class F Notes benefit from 35.00%, 24.60%, 18.60%, 14.20%, 8.00% and 4.80% of note subordination, respectively.- Once stepdown conditions are satisfied, all notes, excluding the Class G notes, will receive their pro-rata share of principal. Step-down conditions include, among others, minimum 45% subordination to the Class A notes and no unreimbursed charge-offs. Once Class G stepdown criteria are satisfied, all notes, including the Class G notes, will receive their pro-rata share of principal. Class G Step-down criteria include all stepdown conditions plus a Class F minimun subordination requirement of 17%.- A swap provided by National Australia Bank Limited (Aa3/P-1/Aa2(cr)/P-1 (cr)) will hedge the interest rate mismatch between the assets bearing a fixed rate of interest, and floating rate liabilities. The notional balance of the swap will follow the schedule amortization of the portfolio.- BNY Trust Company of Australia Ltd (BNY) is the back-up servicer. If Shift is terminated as servicer, BNY will take over the servicing role in accordance with the standby servicing deed and its back-up servicing plan. BNY has delegated the standby servicer function to Verofi, a specialist third-party standby servicer, however BNY retains legal responsibility for the standby servicer’s contractual obligations.Key portfolio features are as follows:- The portfolio is highly diversified both at an obligor level and a geographical level. The largest obligor concentration is 0.3%.- The portfolio has a high yield of 11.3% which provides excess spread to cure portfolio losses.- Heavy commercial vehicle loans are the largest component making up 36.4% of the portfolio, intangible tertiary assets such as installations and fitouts are the second largest component making up 19.6% of the portfolio.Key model assumptions:Moody’s assumptions are an expected portfolio loss rate of 7.00%, and a portfolio Aaa credit enhancement (“PCE”) — representing the loss that Moody’s expects the portfolio to suffer in the event of a severe recessionary scenario — of 40.00%.To address the limited historical loss data on Shift’s portfolio, we have benchmarked the historical performance observed to historical data from and assumptions from comparable Australian commercial auto and equipment ABS originators. We have also overlaid additional stresses into our expected loss and PCE assumptions.Methodology Underlying the Rating ActionThe principal methodology used in these ratings was “Equipment Lease and Loan Securitizations Methodology” published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1243607. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to an upgrade or downgrade of the ratings:Factors that could lead to an upgrade of the notes include a rapid build-up of credit enhancement, due to sequential amortization or better-than-expected collateral performance. The Australian job market is a primary driver of performance.A factor that could lead to a downgrade of the notes is worse-than-expected collateral performance. Other reasons that could lead to a downgrade include poor servicing, error on the part of transaction parties, a deterioration in the credit quality of transaction counterparties, or lack of transactional governance and fraud.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. 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Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. John Paul Truijens VP – Senior Credit Officer Structured Finance Group Moody’s Investors Service Pty. Ltd. 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