DBRS Confirms Master Asset Vehicle III Class 10A Notes at AA (high) (sf)

DBRS has today confirmed the AA (high) (sf) rating of the Class 10A Notes (the Notes) issued by Master Asset Vehicle III (MAVIII).

MAVIII was created as part of the restructuring of certain Canadian third-party asset-backed commercial paper (ABCP) trusts under the Montréal Accord. The assets securing the Notes (the Collateral) previously secured the Series E ABCP issued by Gemini Trust.

On September 7, 2010, DBRS confirmed the AA (high) (sf) rating of the Notes, primarily based on the significant increase of the credit enhancement provided by the subordinated Class 10B Notes.

Since the rating confirmation in September 2010, the enhancement provided to the Notes by the subordinated Class 10B Notes has increased further, from 30.7% to 53.0% as of July 27, 2011. However, one of the underlying assets has a related currency swap that is exposed to extension risk. As the swap rate is higher than prevailing market rates, any principal not exchanged at the swap rate would reduce the enhancement for the Notes. DBRS views the current subordination from the Class 10B Notes as sufficient to mitigate this risk.

There were several outstanding issues with QSPE-XCD Trust, one of the underlying transactions, which have now been settled. DBRS has modeled the Notes accordingly in view of the outcome.

Note:
The applicable methodologies are Rating Canadian Structured Credit Transactions, Canadian Structured Credit Surveillance, CMBS Rating Methodology, CMBS Global Surveillance and Canadian RMBS Methodology, which can be found on our website under Methodologies.