DBRS Confirms Rating of Master Asset Vehicle I Class A-2 Notes at AA (low) (sf)

DBRS Limited (DBRS) has today confirmed the rating of the Master Asset Vehicle I (MAVI) Class A-2 Notes (the Notes) at AA (low) (sf). The Notes were issued by MAVI as part of the Montreal Accord restructured asset-backed commercial paper on January 21, 2009. The Notes are backed by various types of assets, including structured synthetic investments (such as levered and fully funded collateralized debt obligations) as well as other non-levered, non-synthetic traditional structured finance assets.

On May 15, 2015, the collateral related to the terminated LSS CDOs at the time was paid to the MAVI Class A-1 and Class A-2 noteholders. As a result, the outstanding MAVI Class A-1 Notes were fully repaid, and 26% of the outstanding MAVI Class A-2 Notes were paid off.

There have been no credit events since the last review of the Notes in May 2015. There is only one spread-loss trigger matrix (CDX IG7 10Y) left in MAVI. The CDX IG7 10Y index saw its spreads rise steadily to over 100 basis points up until the end of February 2016, with a gradual decline beginning in March 2016. There are 11 long transactions outstanding, totalling $14.1 billion notional, and one short transaction with $858 million in notional.

In the rating report issued by DBRS on January 21, 2009, when the MAVI Notes were originally issued, DBRS stated that three aspects of the transaction were the focus of its rating analysis: (1) the legal and structural elements of the transaction; (2) the probability of the structure’s facing a margin call that could not be satisfied by available collateral and/or available margin funding facilities; and (3) the credit quality of the underlying asset interests held by the MAVI.

Based on these three aspects, the rating of MAVI Class A-2 Notes remains partially constrained despite the improved credit metrics and the widening distance between spread-loss index spreads and their respective trigger levels. As a result, DBRS has confirmed the rating on the MAVI Class A-2 Notes at AA (low) (sf).

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 CLOs and CDOs of Large Corporate Credit (February 2016), Canadian Surveillance Methodology for CDOs of Large Corporate Credit (July 2015) and Legal Criteria for Canadian Structured Finance (August 2015), which are available on our website under Methodologies or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.