DBRS Releases a General Methodology for Rating Canadian Structured Finance Transactions

DBRS has today released a general methodology for rating Canadian structured finance transactions. This methodology is applicable to asset classes for which DBRS does not have a current, specific methodology in place that can be used to assess a new transaction.

The methodology describes the general qualitative and quantitative factors that DBRS considers when rating structured finance transactions. These factors include the operational capabilities of originators and servicers; financial strength of the transaction parties; legal structure and related opinions; transaction structure and features; quality and performance of the collateral pool; proposed credit enhancement; and cash flow stress scenarios.

In its analysis, DBRS reviews the characteristics of the proposed asset pool and the historical performance of assets of a similar nature (if available) to determine a base-case performance for the proposed pool. In accordance with the criteria, DBRS applies stresses to the base case commensurate with each rating level. DBRS then reviews the level of stress that security is able to withstand in light of the transaction’s structural features.

This methodology provides a general guideline for the analysis of structured finance securities and is complementary to DBRS’s asset-specific rating approaches. An asset-specific appendix will be added to this methodology to provide more detailed analysis when a transaction backed by an esoteric or infrequently securitized asset class occurs.

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