DBRS Rates White Point Funding, Inc. at R-1 (low)

Dominion Bond Rating Service (“DBRS”) has today assigned a rating of R-1 (low) to the 4(2) Commercial Paper notes (CP) issued by White Point Funding, Inc. (“WP Funding”) sponsored by Royal Bank of Canada (“RBC”) (R-1 (middle)/AA (low)).

WP Funding is a special-purpose, bankruptcy-remote, commercial paper conduit that is incorporated in Delaware and managed by Global Securitization Services LLC, one of the leading conduit managers in the CP market. RBC is the Administrative Agent. WP Funding may issue up to US$10 billion in CP with a tenor not to exceed 183 days.

WP Funding will use the proceeds derived from the issuance of the CP to purchase and/or finance collateral. Eligible assets can include the following: collateralized debt obligations, credit-linked notes and similar structured products, and credit default swaps referencing eligible asset-backed securities (including collateralized debt obligations), undivided interests in discrete amortizing pools of assets, undivided interests in revolving pools of assets, undivided interests in warehouse facilities, indebtedness secured by assets, certificates of beneficial ownership, and secured or unsecured loans to bankruptcy-remote, special-purpose entities.

Transactions entered into by WP Funding generally will have two-tier transfer structures. Because RBC has formed a special-purpose entity (SPE) named White Point Capital LLC (“WPC”) that is contemplated as the first-tier vehicle in many transactions, DBRS performed an additional bankruptcy-remote analysis on this first-tier vehicle. As this vehicle is effectively “owned” by WP Funding, it was necessary to gain comfort that this SPE would not become insolvent and thus cause WP Funding to become insolvent. DBRS is comfortable that this is unlikely to occur.

WP Funding will have the benefit of a 102% liquidity facility with each acquisition or financing of eligible assets. To ensure the timely repayment of the CP, WP Funding will enter into Liquidity Asset Purchase Agreements (LAPAs) with banks rated at least as high as the CP it issues. The LAPAs’ primary purpose is to mitigate the timing mismatch between the maturity of the CP and the maturity of the assets supporting such CP. The liquidity providers do not contemplate funding for defaulted assets. In addition, the liquidity providers will not be obligated to fund upon a bankruptcy of WP Funding.

In addition to the committed LAPA, WP Funding has at its disposal an uncommitted program-wide Liquidity Loan facility. Pursuant to the program documents for this facility, RBC may (but is not obligated to) make short-term advances in the form of loans to WP Funding to enable it to pay its maturing CP.

WP Funding, like most commercial paper conduits, benefits from two levels of credit enhancement: transaction-specific and Program Wide Credit Enhancement (“PWCE”). The transaction-specific credit enhancement is specifically earmarked for each transaction, whereas the PWCE is fungible across all deals.

On the transaction level, each deal must be credit enhanced to a minimum level of “A”. Credit enhancement may take various forms including, but not limited to, internal support (e.g., overcollateralization, excess spread, reserve account, cash collateral account, and subordinated classes of financial assets) and/or third-party credit support (e.g., third-party guaranty, letter of credit, monoline insurance, swaps, hedges, and other structured derivative protection).

PWCE will be provided by RBC, or other eligible institution, in the form of a Credit Asset Purchase Agreement and will be available to all transactions in WP Funding’s portfolio in time to retire the CP when due. The required amount of PWCE is 10% of the asset balance. However, at no time will the credit enhancement amount be less than US$100 million.

RBC is currently the largest chartered bank in Canada in terms of market capitalization and assets. RBC’s conduit business began in 1994 as a complement to its existing products. Prior to WP Funding, RBC sponsored and administered five CP conduits: three in the Canadian market (Plaza Trust, Storm King Funding, and Pure Trust), and two in the U.S. market (Old Line Funding LLC and Thunder Bay Funding LLC). The aggregate cumulative commitment amount as of mid-year 2005 for RBC’s CP conduits exceeded US$24 billion. DBRS currently rates the CP issued from four of RBC’s six conduits.