DBRS Morningstar Confirms Ratings of Fortified Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings of all the outstanding Real Estate Secured Line of Credit-Backed notes (the Notes) issued by Fortified Trust as part of DBRS Morningstar’s continued efforts to provide timely credit rating opinions and increased transparency to market participants:

-- Class A Notes, Series 2016-1 at AAA (sf)
-- Class B Notes, Series 2016-1 at AA (high) (sf)
-- Class C Notes, Series 2016-1 at A (high) (sf)

-- Class A Notes, Series 2017-1 at AAA (sf)
-- Class B Notes, Series 2017-1 at AA (high) (sf)
-- Class C Notes, Series 2017-1 at A (high) (sf)

-- Class A Notes, Series 2019-1 at AAA (sf)
-- Class B Notes, Series 2019-1 at AA (high) (sf)
-- Class C Notes, Series 2019-1 at A (high) (sf)

-- Class A Notes, Series 2019-2 at AAA (sf) (together with Class A Notes, Series 2016-1, the Class A Notes, Series 2017-1, and the Class A Notes, Series 2019-1, the Class A Notes);
-- Class B Notes, Series 2019-2 at AA (high) (sf) (together with Class B Notes, Series 2016-1, the Class B Notes, Series 2017-1, and the Class B Notes, Series 2019-1, the Class B Notes); and
-- Class C Notes, Series 2019-2 at A (high) (sf) (together with the Class C Notes, Series 2016-1, the Class C Notes, Series 2017-1, and the Class C Notes, Series 2019-1, the Class C Notes).

The rating confirmations are based on the factors listed below, including additional analysis and, where appropriate, additional stresses to expected performance as a result of the global efforts to contain the spread of the Coronavirus Disease (COVID-19). The DBRS Morningstar Sovereigns group initially published its outlook on the coronavirus’ impact on key economic indicators for the 2020–22 time frame. The scenarios were updated on June 1, 2020. For details, see “Global Macroeconomic Scenarios: Implications for Credit Ratings” at https://www.dbrsmorningstar.com/research/361867. For the confirmed ratings, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis:

(1) The levels of credit enhancement provided by subordination (3.9% and 1.9% for the Class A Notes and Class B Notes, respectively), the Cash Reserve Account with a current balance of zero, and current excess spread of 1.54% for the Series 2017-1 Notes and 1.33% for the Series 2016-1 Notes, the Series 2019-1 Notes, and the Series 2019-2 Notes annually. The Cash Reserve Account can build up to 1.35% minus the three-month excess spread if the three-month excess spread falls below 0.95%.

(2) Performance of the underlying collateral remains stable and within expectations, with the monthly payment rate standing at 3.41%. There were no losses as of May 2020.

(3) The Notes benefit from several structural elements typically found in securitizations in Canada that mitigate default risk and the risks related to the credit deterioration of associated counterparties.

(4) The assets in the pool comprise a well-diversified portfolio of home equity line of credit (HELOC) accounts with a minimum of 20% equity in each of the mortgaged properties, which secures the HELOC accounts.

The Bank of Montreal (BMO) is the servicer of the assets in the custodial pool. BMO is one of Canada’s largest banks by assets and is currently rated AA/R-1 (high) by DBRS Morningstar.

The performance and characteristics of the custodial pool and the Notes are available and updated each month in the Monthly Canadian ABS Report available at www.dbrsmorningstar.com.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
The principal methodology is the Master Canadian Structured Finance Surveillance Methodology (June 28, 2019), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

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.dbrsmorningstar.com or contact us at [email protected].

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