DBRS Morningstar Confirms Pure Grove Funding Series 1 Asset-Backed Commercial Paper Notes, Class Maple and Class Oak at R-1 (high) (sf)

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Series 1 Asset-Backed Commercial Paper Notes, Class Maple and Class Oak (the Notes) issued by Pure Grove Funding (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 August 31, 2021, the outstanding Assets consisted of auto loans (53.3%) and auto leases (46.7%).

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. RBC provides third-party credit enhancement to the Trust in the form of PWCE in an amount equal to the greater of (1) 10% of the face amount of the Notes issued by the Trust (other than transactions supported by wrapped liquidity) and (2) the largest transaction limit (other than transactions supported by wrapped liquidity), available as enhancement for the Notes. Because of certain events of default associated with drawings exceeding 20% of the PWCE, DBRS Morningstar will only allocate a maximum of 20% of the available PWCE to enhance the ratings of transactions. As at August 31, 2021, none of the transactions funded through the Trust relied on PWCE to meet a AAA standard.

(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 the Rating Agency Condition is otherwise satisfied, as defined in DBRS Morningstar’s “Legal Criteria for Canadian Structured Finance.”

(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 four multi-seller conduits in Canada, with an aggregate ABCP face amount of $4,680,040,173 as at August 31, 2021.

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 Master Canadian Structured Finance Surveillance Methodology (June 7, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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