DBRS Confirms Plaza Trust at R-1 (high) (sf)

As part of DBRS’s ongoing efforts to increase the transparency of reporting asset-backed commercial paper (ABCP) conduit activity, DBRS has today released a final Transaction Summary report providing details of Transaction 56 (the Transaction) of Plaza Trust (the Trust), which consists of a portfolio of retail auto loans and dealer floorplan receivables.

DBRS is providing a final rating confirmation on the Series 1 Asset-Backed Commercial Paper Notes (the Notes) of the Trust at R-1 (high) (sf). DBRS has reviewed the transaction structure, documentation and the levels and mechanics of credit enhancement proposed as part of its transactional review. While there are a number of areas in which the Transaction diverges from the applicable DBRS methodologies, the credit enhancement levels and mechanics are generally consistent with an assessment of at least AA (low), the minimum threshold to allow for the use of Enhanced Liquidity.

It should be noted that the Enhanced Liquidity will address a number of risks in addition to those covered by the global liquidity standard (GLS). The additional risks covered include, but are not restricted to, interest rate hedging related to the variable funding note (VFN) issuer, timing of cash flow receipts, anomalous aspects of pool compositions and other issues related to the Servicer and its corporate parent. The Enhanced Liquidity facility will be available to repay outstanding principal and interest on the Notes in all but a very limited number of circumstances, including non-provision of notice of borrowing or the insolvency of Plaza Trust.

It is an exception to DBRS criteria for rating Canadian ABCP supported by Enhanced Liquidity to restrict drawings under Enhanced Liquidity should the Trust become insolvent. This exception is acceptable on the basis that the probability of the Trust becoming insolvent is very low, consistent with the R-1 (high) rating which must be achieved by each transaction entered into by Plaza Trust (DBRS applies the “weakest link” approach to rating all Canadian ABCP conduits), the inability of the Enhanced Liquidity provider to petition the Trust into bankruptcy and the fact that the sponsor bank (Royal Bank of Canada (RBC), rated AA and R-1 (high) by DBRS) is the provider of the Enhanced Liquidity and program-wide credit enhancement to Plaza Trust, as well as acting as Financial Services Agent for the Trust, provide additional support for the decision.

Note:
The applicable methodologies are Rating Canadian Auto Loan Securitization, Rating Canadian Auto Lease Transactions, Rating Canadian Floorplan Securitizations, Legal Criteria for Canadian Structured Finance, Swap Criteria for Canadian Structured Finance and The DBRS Approach to Rating Canadian ABCP Supported by Enhanced Liquidity, which can be found on our website under Methodologies.