DBRS Finalizes Provisional Ratings of AAA (sf), AA (sf), A (sf) and BBB (high) (sf) on Fairstone Financial Issuance Trust I, Series 2019-1

DBRS Limited (DBRS) finalized its provisional ratings on the Series 2019-1 Notes (the Notes) issued by Fairstone Financial Issuance Trust I (the Trust) as follows:

-- AAA (sf) on the Series 2019-1 Class A Notes
-- AA (sf) on the Series 2019-1 Class B Notes
-- A (sf) on the Series 2019-1 Class C Notes
-- BBB (high) (sf) on the Class D Notes

The Revolving Period Termination Date is March 22, 2021, and the Final Maturity Date is March 21, 2033.

The ratings are based on the following factors:

1. The levels of credit enhancement (CE) provided by subordination (27.50%, 16.00% and 6.00% of the Initial Pool Balance for AAA (sf), AA (sf) and A (sf) rated notes, respectively), overcollateralization (OC) of 9.00% (of the Initial Pool Balance), cash reserve of 1.25% (of the Initial Pool Balance) and excess spread are commensurate with the ratings assigned.

2. The sequential pay structure and non-amortizing OC and cash reserve increase enhancement over time during the amortization period.

3. The considerable experience of the Seller and Servicer with respect to originating, underwriting and servicing in the consumer loan industry.

The DBRS base case cumulative net loss (CNL) was derived through an analysis of the historical performance of the Seller’s owned and managed portfolio in conjunction with the composition of the securitized pool and securitized pool eligibility criteria and concentration conditions. After determining the base case CNL, DBRS runs a variety of stress tests using its proprietary cash flow engine, which incorporates the CE available and structural features, taking into consideration any fees and expenses paid ahead of interest and principal in the waterfall and the ability to defer principal and interest payments to the Class B Notes, Class C Notes and Class D Notes until the Class A Notes have been fully repaid. DBRS stress testing indicates that the Trust’s ability to repay interest and principal of the Notes is consistent with their respective ratings.

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

The principal methodology is Rating Canadian Structured Finance Transactions (April 2018), which can be found on dbrs.com under Methodologies & Criteria.

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 under Related Documents or by contacting us at info@dbrs.com.

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

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

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