Fitch Ratings upgraded seven and affirmed five classes of asset-backed floating-rate notes from two Pepper SPARKZ transactions, while revising the outlook on five notes to positive from stable, according to a Thursday release.

The transactions are backed by pools of first-ranking Australian automotive and equipment loan and lease receivables originated by Pepper Asset Finance, a subsidiary of Pepper Money (ASX:PPM).

The ratings for the Pepper SPARKZ Trust number four classes D, E, and F were upgraded to AA+sf, AA-sf, and BBB+sf from A+sf, BBB+sf, and BBsf, respectively.

The ratings for the Pepper SPARKZ Trust number four classes A1-a, B, and C were all affirmed at AAAsf.

The ratings for the Pepper SPARKZ Trust number five classes C, D, E, and F were upgraded to AAAsf, AAAsf, AA+sf, and AAsf from AA+sf, A+sf, BBB+sf, and BBB-sf, respectively.

The ratings for the Pepper SPARKZ Trust number four classes A1-a and B were both affirmed at AAAsf.

The upgrades were driven by the build-up of credit enhancement.

The positive outlooks reflect the notes' sensitivity to decreased defaults and increased recoveries against the expected increase in credit enhancement over the next 12 months.

The portfolio performance is supported by Australia's continued economic growth and tight labor market, despite rapid interest rate hikes in 2022 to 2023.

The notes were issued by BNY Trust Company of Australia as trustee.