DBRS Confirms Clarity Trust, Series A, Class A Notes at R-1 (high)

DBRS has today confirmed the ratings of the Series A, Class A Notes (the Notes) issued by Clarity Trust (the Trust) at R-1 (high) (sf), as part of its annual review of publicly rated asset-backed commercial paper (ABCP) conduits. The confirmation is part of DBRS’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

The Trust is a multi-seller, multi-asset securitization conduit administered by National Bank Financial (NBF). The Trust engages in traditional asset transactions. Assets and/or interests acquired by the Trust from sellers (the Assets) are subject to eligibility criteria and/or confirmation from DBRS. As of June 30, 2014, the Assets consisted primarily of insured mortgages (80.8%) and conventional mortgages (19.2%).

The rating confirmations are based on the following considerations:

(1) Credit enhancement levels are consistent with similarly rated programs in Canada. From inception, every transaction funded by the Notes has been independently structured to meet a AAA standard.

(2) In addition to the internal credit enhancement, the Notes benefit from external series-wide credit enhancement (SWCE). The SWCE is in the form of a letter of guarantee from National Bank of Canada, which is available to be drawn in the event that collections are insufficient to satisfy the obligations of the Trust relating to the Notes.

(3) The Notes also benefit from a first loss subordinated note placed with a third party investor.

(4) The liquidity facilities meet DBRS’s Global Liquidity Standard (GLS) and are available to assist the Trust in repaying the Notes if the Trust is not able to issue new Notes to do so. The commitment amount equals at least 100% of the face value (including interest) of all outstanding Notes.

(5) Minimum credit ratings of AA (low) or R-1 (middle) or their equivalent for liquidity providers and credit enhancers and A (high) or R-1 (middle) or their equivalent for hedge counterparties are required unless otherwise approved by DBRS.

(6) The Assets, through Securitization Agreements, are structured to be bankruptcy remote from the sellers and the bankruptcy remoteness is supported by legal opinions.

(7) All transactions are reviewed by DBRS prior to initial funding by the Trust.

(8) The performance of the underlying collateral across all asset classes is strong.

(9) NBF has significant experience in structuring, administering and managing multi-asset, multi-seller securitization programs.

NBF administers two multi-seller asset-backed commercial paper conduits, with an aggregate outstanding amount of $2,074,717,010 as of June 30, 2014.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Canadian ABCP, Canadian Structured Finance Surveillance Methodology, Legal Criteria for Canadian Structured Finance and Derivatives Criteria for Canadian Structured Finance, which are available on our website under Methodologies.