DBRS Morningstar Confirms Ratings of Genesis Trust II

DBRS Limited (DBRS Morningstar) confirmed the following ratings on the outstanding notes issued by Genesis Trust II as part of DBRS Morningstar’s continued efforts to provide timely credit rating opinions and increased transparency to market participants:

-- Real Estate Secured Line of Credit-Backed Class A Notes, Series 2020-1 at AAA (sf) (the Class A Notes)
-- Real Estate Secured Line of Credit-Backed Class B Notes, Series 2020-1 at AA (high) (sf) (the Class B Notes)
-- Real Estate Secured Line of Credit-Backed Class C Notes, Series 2020-1 at A (high) (sf) (together with the Class A Notes and the Class B Notes, the Series 2020-1 Notes)

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 March 17, 2021, in its “Global Macroeconomic Scenarios: March 2021 Update” at https://www.dbrsmorningstar.com/research/375376. For the Series 2020-1 Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating actions are based on the following factors as of March 2021:

(1) The levels of credit enhancement provided by subordination (3.9% and 1.9% for the Class A Notes and the Class B Notes, respectively), a Cash Reserve Account that builds up after the occurrence of a Cash Reserve Event, and excess spread of 1.35% annually (after the swap).

(2) Performance of the underlying collateral remains stable and is within DBRS Morningstar expectations. The three-month average loss rate stood at 1 bps and the monthly payment rate was 5.1%.

(3) A bankruptcy-remote structure that includes 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 custodial pool comprise a well-diversified portfolio of home equity line of credit (HELOC) accounts underwritten with a minimum 20% equity in each of the mortgaged properties, which secures the HELOC accounts.

The Toronto-Dominion Bank (TD) is the servicer of the assets in the custodial pool. TD is one of Canada’s largest banks by assets and is currently rated AA (high)/R-1 (high) with a Stable trend by DBRS Morningstar.

The performance and characteristics of the custodial pool and the Series 2020-1 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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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