DBRS Releases Methodology for Canadian Structured Finance Flow-Through Ratings

DBRS has today published its methodology for analyzing flow-through ratings, in which a security is rated based on the credit strength of a third-party entity rather than on the credit strength of the issuer. For DBRS to rate a security on a flow-through basis, there must be certain elements of the transaction structure that justify reliance on an entity that is not the issuer. These elements generally fall into one of two categories: where the third party directly supports the security being issued or where the third party provides all or close to all the cash flow of the issuer that will be used to repay the security.

“Structured finance flow-through transactions tend to be unique transactions, tailored to a specific situation,” explains Jamie Feehely, Managing Director. “Therefore, they must be examined in detail for DBRS to be satisfied that risks are appropriately mitigated.”

The methodology providing DBRS's processes and criteria is available by contacting us at info@dbrs.com.