DBRS Assigns Provisional Rating to HERO Funding II 2016-4B

DBRS, Inc. (DBRS) has today assigned a provisional rating of BBB (sf) to the $44,500,000 Class B Notes (the Notes) issued by HERO Funding II 2016-4B (the Issuer).

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 Issuer’s valid first-priority security interest in the collateral, the non-consolidation of the Issuer with the Transferor 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 the Residual Certificate issued by HERO Funding 2016-4 (Please see HERO Funding 2016-4 Presale Report for further details on the Residual Certificate), which is backed by (1) $204.7 million of PACE bonds (PACE Bonds) issued by the three PACE Bond Issuers: Western Riverside Council of Governments, San Bernardino Associated Governments and County of Los Angeles, California, and (2) up to $87.7 million of PACE Bonds to be acquired post-closing.

Credit enhancement for the Notes consists of available funds allocated to the Residual Certificate after payments of principal and interest on the HERO Funding 2016-4 Class A notes and certain other transaction expenses (primarily excess spread) in excess of Class B debt service and transaction expenses.

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

The applicable methodologies are Rating U.S. Property Assessed Clean Energy (PACE) Securitizations and Rating U.S. Structured Finance Transactions, 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.