DBRS Morningstar Confirms Bay Street Funding Trust’s Short-Term ABN, Series 1, Class A Notes at R-1 (high) (sf)

DBRS Limited (DBRS Morningstar) confirmed the rating of R-1 (high) (sf) on the Short-Term ABN, Series 1, Class A Notes (the Notes) issued by Bay Street Funding Trust (the Trust) as part of its annual review of publicly rated, asset-backed commercial paper 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 Scotia Capital Inc. (Scotia Capital). The Trust engages only in traditional asset transactions. Assets and/or interests the Trust acquires (the Assets) from sellers are subject to eligibility criteria and/or confirmation from DBRS Morningstar. As of April 30, 2020, the Assets consisted of auto leases (26.9%), residential rental equipment (17.4%), trade receivables (16.2%), auto loans (15.9%), insured mortgages (9.9%), auto fleet (5.0%), conventional mortgages (4.5%), and auto rental (4.2%).

The confirmation of the rating is based on the following factors, each of which include additional analysis and, where appropriate, additional stresses to expected performance of funded transactions as a result of the global efforts to contain the spread of the Coronavirus Disease (COVID-19) pandemic. On July 22, 2020, the DBRS Morningstar sovereigns group published its outlook on the impact of the coronavirus on key economic indicators for the 2020–22 time frame, which was updated from the initial outlook that was published on April 16, 2020. For details, please see “Global Macroeconomic Scenarios: July Update.” For the confirmed rating, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis.

(1) Credit enhancement levels are consistent with similarly rated programs in Canada. From inception, every transaction funded by the Notes has been independently structured to meet a AAA standard.

(2) Liquidity facilities meet DBRS Morningstar’s Global Liquidity Standard and are available to assist the Trust in repaying the Notes if the Trust is not able to issue new Notes to do so. The commitment amount equals at least 102% of the face value (including interest) of all outstanding Notes.

(3) Minimum credit ratings of “A” or R-1 (low) or their equivalent for liquidity providers, credit enhancers, and hedge counterparties are required, unless otherwise satisfy the Rating Agency Condition as defined in DBRS Morningstar’s “Legal Criteria for Canadian Structured Finance.”

(4) The Assets, through Securitization Agreements, are typically structured to be bankruptcy remote from the sellers, and the bankruptcy remoteness is supported by legal opinions.

(5) DBRS Morningstar reviews all transactions are reviewed prior to initial funding by the Trust.

(6) The performance of the underlying collateral is strong.

(7) Scotia Capital has significant experience in the structuring, administering and managing of multi-asset, multi-seller securitization programs.

Scotia Capital administers two multi-seller conduits with aggregate outstanding assets of $3,260,670,200 as of April 30, 2020.

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:
All figures are in Canadian dollars unless otherwise noted.

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 info@dbrsmorningstar.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.

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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