DBRS Morningstar Confirms Ratings on Fairstone Financial Issuance Trust I, Series 2019-1

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following notes (the Notes) issued by Fairstone Financial Issuance Trust I (the Trust) as part of DBRS Morningstar’s continued efforts to provide timely credit rating opinions and increased transparency to market participants:

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

The Notes are backed by a diversified pool of Canadian, fixed-rate, amortizing, near- and non-prime, unsecured, and secured consumer loans. Secured loans are secured by a second-ranking (and in certain limited instances, a first-ranking) priority mortgage or immovable hypothec on real properties located across Canada.

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on December 2, 2020, in its “Global Macroeconomic Scenarios: December Update” at https://www.dbrsmorningstar.com/research/370672. For the rated Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating confirmations are based on the following factors, each of which includes additional analysis and, where appropriate, additional stresses to expected performance as a result of global efforts to contain the spread of the coronavirus pandemic:

The rating confirmation is based on the performance of the transaction as of October 2020:

-- The level of credit enhancement provided by subordination (30.2%, 17.6%, and 6.6% of the current note balance for the Class A, B, and C Notes, respectively), overcollateralization of 11.2%, and a fully funded nonamortizing cash reserve of 1.4% is at its required level and continues to provide support for the ratings assigned.

-- The gross yield and payment rate have been stable, averaging 27.8% and 4.7%, respectively, over the past 12 months.

-- The three-month average net loss rate has also remained stable at 6.8% as of October 2020.

-- The experience of Fairstone Financial Inc. with respect to originating, underwriting, and servicing in the consumer loan industry.

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 (August 31, 2020), 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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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