DBRS Upgrades Rating of Master Asset Vehicle I Class B Notes to A (high) (sf) from A (sf) and Confirms Rating of Class C Notes at BBB (low) (sf)

DBRS Limited (DBRS) has today upgraded ratings of the Class B Notes issued by Master Asset Vehicle I (MAVI) to A (high) from A (sf). DBRS has also confirmed the rating of the Class C Notes (collectively with the Class B Notes, the Notes) at BBB (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.

Along with the Notes, DBRS currently rates the Class A-2 Notes issued by MAVI (the Senior MAVI Notes). On May 15, 2015, the collateral related to the terminated LSS CDOs at the time was paid to MAVI Class A-1 and Class A-2 noteholders. As a result, the outstanding MAVI Class A-1 Notes were fully repaid. The enhancement available to Class B and Class C Notes had increased, which resulted in an upgrade on the Class B Notes and an assignment of a new rating on the Class C Notes.

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.

The same rating rationale and rating considerations used for the Senior MAVI Notes (other than the amount of subordination available to the Notes) were used in assessing the rating of the Notes. 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 MAVI. Since the Class B and Class C Notes are subordinated to the Senior MAVI Notes, they will be exposed to more risk relating to each of these three aspects than the Senior MAVI Notes.

Taking into consideration the current enhancement available to Class B Notes and the aforementioned legal and structural constraints, DBRS has upgraded the MAVI Class B Notes to A (high) (sf) from A (sf).

Based on the same constraints, the amount of enhancement available and the fact that the Class C Notes are subordinated to the Class B Notes, DBRS has confirmed the rating of the MAVI Class C Notes at BBB (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.

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