DBRS Morningstar Requests Comments on U.S. Whole Business Securitization Appendices

DBRS Morningstar is requesting comments on the proposed material updates to the following methodologies (RFC Methodologies) to be used to determine credit ratings in the U.S. Whole Business Securitization (WBS) asset class:
-- Rating U.S. Structured Finance Transactions methodology—U.S. Whole Business Securitizations (WBS New Issue Appendix);
-- Operational Risk Assessment for U.S. ABS Originators methodology—U.S. Whole Business Securitizations (WBS Managers Exhibit);
-- Operational Risk Assessment for U.S. ABS Servicers methodology—U.S. Whole Business Securitizations (WBS Servicers Exhibit); and
-- Master U.S. ABS Surveillance Methodology—U.S. Whole Business Securitizations (WBS Surveillance Appendix).

Upon the close of the Request for Comment period, the above-referenced RFC Methodologies may supersede the U.S. ABS General Ratings Methodology (December 2018) (the General Ratings Methodology) in respect of the U.S. Whole Business Securitization asset class. Please refer to the end of the press release for Additional Disclosures.

WBS NEW ISSUE APPENDIX
Please refer to the WBS New Issue Appendix to the Rating U.S. Structured Finance Transactions methodology, which presents the principal asset class methodology that DBRS Morningstar intends to apply to assign new credit ratings in the WBS asset class following the finalization of the RFC Methodologies. The WBS New Issue Appendix provides a discussion of the key analytical and credit considerations, collateral quality and metrics, legal and regulatory considerations, and cash flow analysis applicable to DBRS Morningstar’s analysis of WBS asset class transactions.

Under the proposed WBS New Issue Appendix, DBRS Morningstar incorporates key methodology updates that include a breakeven revenue reduction applied to the base case cash flow expectation as the primary driver for determining the rating, a typical range of net cash flow declines that DBRS Morningstar expects a transaction to withstand at certain rating categories, and clarification on eligibility and risk factors that are considered.

WBS MANAGERS EXHIBIT AND WBS SERVICERS EXHIBIT
Please refer to the WBS Managers Exhibit to the Operational Risk Assessment for U.S. ABS Originators methodology and to the WBS Servicers Exhibit to the Operational Risk Assessment for U.S. ABS Servicers methodology that formalize the sample list of questions DBRS Morningstar expects to use in the operational risk reviews of managers and servicers operating in the WBS asset class, upon the finalization of the RFC Methodologies.

WHOLE BUSINESS SECURITIZATION SURVEILLANCE APPENDIX
Please refer to the WBS Surveillance Appendix to the Master U.S. ABS Surveillance methodology which presents the criteria that DBRS Morningstar intends to apply in connection with the surveillance of new DBRS Morningstar credit ratings in the WBS asset class following the finalization of the RFC Methodologies.

DBRS Morningstar deems the updates to the RFC Methodologies to be material as the WBS New Issue and WBS Surveillance Appendices set forth updated approaches with the addition of a formalized new WBS Managers Exhibit and WBS Servicers Exhibit. DBRS Morningstar will apply the WBS New Issue and WBS Surveillance Appendices in addition to the WBS Managers and WBS Servicers Exhibits to outstanding credit ratings through the surveillance process.

DBRS Morningstar currently rates 11 classes of notes across six publicly rated U.S. Whole Business Securitizations transactions. DBRS Morningstar expects no impact to outstanding ratings if the methodology is finalized in its current proposal. Potentially impacted public credit ratings include:
-- Coinstar Funding, LLC Series 2017-1, Class A-1 VFN, BBB (sf)
-- Coinstar Funding, LLC Series 2017-1, Class A-2 Notes, BBB (sf)
-- Coinstar Funding, LLC Series 2018-1, Class A-2 Notes, BBB (sf)
-- SESAC Finance, LLC, Series 2019-1, Class A-2 Notes, BBB (sf)
-- SESAC Finance, LLC, Series 2022-1, Class A-1 Notes, BBB (sf)
-- SESAC Finance, LLC, Series 2022-1, Class A-2 Notes, BBB (sf)
-- ME Funding, LLC, Series 2019-1, Class A-1 VFN, BBB (high) (sf)
-- ME Funding, LLC, Series 2019-1, Class A-2 Notes, BBB (sf)
-- AB Issuer LLC, Class A-1 Variable Funding Notes, BBB (sf)
-- AB Issuer LLC, Advance Funding Facility, BBB (sf)
-- AB Issuer LLC, Class A-2 Fixed Rate Senior Secured Notes, BBB (sf)

ADDITIONAL DISCLOSURES
As disclosed in the Notice Regarding the Analytical Integration of DBRS and Morningstar Credit Ratings (Integration Notice) accompanying the General Ratings Methodology, DBRS Morningstar has applied the General Ratings Methodology, effective December 3, 2019, in connection with assigning of new DBRS Morningstar credit ratings, and monitoring outstanding DBRS Morningstar credit ratings, in this asset class (see the following press release for more details: https://www.dbrsmorningstar.com/research/353821). In connection with the finalization of the RFC Methodologies, the Integration Notice will be updated to remove the reference to the U.S. Whole Business Securitization asset class, and the General Ratings Methodology will remain in use in respect of the asset classes referenced in the Integration Notice, as updated.

Comments should be received on or before October 28, 2022. Please submit your comments to the following email address:
sfcomments@dbrsmorningstar.com

DBRS Morningstar publishes on its website all comments received, except in cases where confidentiality is requested by the respondent.

Notes:
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.

DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

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