DBRS Morningstar Confirms Plaza Trust’s Series 1 ABCP Notes at R-1 (high) (sf)
ABCPDBRS Limited (DBRS Morningstar) confirmed the rating of the Series 1 Asset-Backed Commercial Paper Notes (the Notes) issued by Plaza Trust (the Trust) at R-1 (high) (sf) as part of its annual review of publicly rated asset-backed commercial paper (ABCP) conduits. The confirmation is part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants.
The Trust is a multi-seller, multi-asset securitization conduit administered by the Royal Bank of Canada (RBC; rated AA (high) with a Stable trend by DBRS Morningstar). The Trust engages in only traditional asset transactions. Assets and/or interests acquired by the Trust from sellers (the Assets) are subject to eligibility criteria and/or confirmation from DBRS Morningstar. As at September 30, 2019, outstanding Assets consisted of auto leases (32.9%), conventional mortgages (23.2%), auto loans (15.3%), insurance premium loans (10.6%), credit card receivables (9.5%), auto rental (5.7%), floorplan (2.8%), and trade receivables (0.0%).
The rating confirmation is based on the following considerations:
(1) Credit enhancement levels are consistent with similarly rated programs in Canada. From inception, each transaction is structured to achieve a AAA standard on a stand-alone basis (unless other structural elements or mitigants that are acceptable to DBRS Morningstar are available to that transaction, such as program-wide credit enhancement (PWCE), enhanced liquidity, or full-wrap liquidity to achieve that level).
(2) In addition to the internal credit enhancement, all transactions in the Trust have third-party enhancement available to maintain the R-1 (high) (sf) rating on the Notes. Third-party credit enhancement is provided to the Trust by RBC in the form of PWCE in an amount up to 10% of the outstanding Notes (other than transactions supported by wrapped liquidity). Because of certain events of default associated with drawings in excess of 20% of the PWCE, DBRS Morningstar will only allocate a maximum of 20% of available PWCE to enhance the ratings of transactions. As at September 30, 2019, there were no transactions funded through the Trust that relied on PWCE.
(3) Liquidity facilities meet DBRS Morningstar’s Global Liquidity Standard and are available to assist the Trust in repaying the Notes in the event that the Trust is not able to issue new Notes to do so. The commitment amount is equal to at least 102% of the face value (including interest) of all outstanding Notes.
(4) Minimum credit ratings of “A” or R-1 (low) by DBRS Morningstar or their equivalent for liquidity providers, credit enhancers, and hedge counterparties are required, unless otherwise approved by DBRS Morningstar.
(5) The Assets, through securitization agreements, are typically structured to be bankruptcy remote from the sellers, and the bankruptcy remoteness is supported by legal opinions.
(6) DBRS Morningstar reviews all transactions prior to initial funding by the Trust.
(7) The performance of the underlying collateral across all asset classes is strong.
(8) RBC has significant experience in structuring, administering, and managing multi-asset, multi-seller securitization programs.
RBC administers three multi-seller conduits in Canada, with an aggregate ABCP face amount of $5,767,644,180 as at September 30, 2019.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is Master Canadian Structured Finance Surveillance Methodology, 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 Morningstar 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.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.
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