The distrust and doubts overlay in the Moody’s Investors Service take on the credit worthiness of Zip Master Trust has been waylaid in a credit upgrade - to Aaa - on Friday.
Nobody really believes the Zip Co credit story all that much more than the Afterpay credit story and Moody’s is an informed sceptic with reason.
The Class A1 Notes of the Zip Master Trust Series 2019-1 and the same notes for the Series 2020-1 trust and also 2021-1 all skipped from Aa2 to Aaa, the highest rating in the Moody’s scale.
“In Moody's view, the strong and stable performance of the receivables, demonstrated by the additional historical data accumulated since the first Zip Master Trust issuance in 2019, is commensurate with the higher ratings level of the senior Class A1 Notes reflected in today's rating action,” the ratings agency said.
“We also note that the performance of the portfolio remained within expectations during a time of heightened economic stress, resulting from the coronavirus outbreak.
“In addition, the seasoning of Zip's portfolio and operating model reduces the risk of severe losses driven by portfolio performance or operational risk factors.”
A Moody’s Aaa imprimatur – even if it's asset-backed securities rather the junk bond credit standing of Zip Co Limited – is a certificate of progress for Zip who cannot have been all that confident they were telling the story straight to Moody’s and the market all these years.
Dissonance around reliability of past reporting of credit losses, arrears and the like is a testy theme for Australia’s polarised BNPL sector.
Moody’s almost placed a gold star on Zip’s workbook.
“The rating action reflects the stable performance of the underlying asset portfolio in 2020 and 2021 during a time of heightened economic stress, exhibiting low levels of arrears and loss; and the growth and development observed in the Australian buy-now-pay later market,” they said.