DBRS Assigns Provisional Rating to HERO Funding 2016-3

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following notes (the Notes) issued by HERO Funding 2016-3:

-- Series 2016-3, Class A1 Notes* rated AA (sf)
-- Series 2016-3, Class A2 Notes* rated AA (sf)

*Aggregate Class A will be $320,243,000.

The rating is based on DBRS’s review of the following analytical considerations:
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the rating addresses the payment of timely interest on a semi-annual basis and the payment of principal by the Scheduled Maturity.
-- The capabilities of Renovate America, Inc. with regard to originations and underwriting.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the Depositor with the Transferor, that the trust has a valid first-priority security interest in the Collateral and matters relating to Cayman Islands law and the consistency with DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.
-- Review of legal considerations specific to property-assessed clean energy (PACE).
-- Servicing is performed by local county tax collection offices.

The Notes are secured by approximately (1) $264.1 million of PACE bonds (PACE Bonds) issued by the three PACE Bond Issuers: WRCOG, SANBAG and LA County and (2) up to $66.0 million of PACE Bonds to be acquired post-closing. Initial credit enhancement for the Notes is 6.00%, consisting of overcollateralization in the PACE Bond portfolio and a liquidity reserve account, which is funded at closing at 3.00% of the PACE Bond Portfolio Target Balance. Additional credit support may be provided from excess spread available in the structure.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating U.S. Property Assessed Clean Energy (PACE) Securitizations, which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see the attached appendix for additional information regarding sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen 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.