DBRS Morningstar Requests Comments on U.S. Agricultural Production Lending 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. Agricultural Production Lending (APL) asset class:
-- Rating U.S. Structured Finance Transactions methodology—U.S. Agricultural Production Lending (APL New Issue Appendix);
-- Operational Risk Assessment for U.S. ABS Originators methodology—U.S. Agricultural Production Lending (APL Originators Exhibit);
-- Operational Risk Assessment for U.S. ABS Servicers methodology—U.S. Agricultural Production Lending (APL Servicers Exhibit); and
-- Master U.S. ABS Surveillance methodology—U.S. Agricultural Production Lending (APL 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) (General Ratings Methodology) in respect of the APL asset class. Please refer to the end of the press release for Additional Disclosures.

APL NEW ISSUE APPENDIX
Please refer to the APL 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 APL asset class following the finalization of the RFC Methodologies. The APL 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 APL asset class transactions.

Under the proposed APL New Issue Appendix, DBRS Morningstar incorporates key methodology updates that include (1) a typical range of rating-level stress multiples applied to the expected case charge-off rate, (2) rating specific, blended probability of defaults of the underlying insurance providers that have been determined using the DBRS CLO Asset Model and (3) loan maturity date to establish payment timing of the securitization pool.

APL ORIGINATORS EXHIBIT AND APL SERVICERS EXHIBIT
Please refer to the APL Originators Exhibit to the Operational Risk Assessment for U.S. ABS Originators Methodology and APL 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 originators and servicers operating in the APL asset class, upon the finalization of the RFC Methodologies.

APL SURVEILLANCE APPENDIX
Please refer to the APL 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 APL asset class following the finalization of the RFC Methodologies.

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

DBRS Morningstar currently rates four classes of notes across two publicly rated U.S. Agricultural Production Lending transactions. DBRS Morningstar expects no impact to outstanding ratings if the methodology is finalized in its current proposal. Potentially impacted public credit ratings include:
-- ARM Master Trust, LLC, Series 2021-T1 Agricultural Loan Backed Notes, Class A, A (sf)
-- ARM Master Trust, LLC, Series 2021-T1 Agricultural Loan Backed Notes, Class B, BBB (sf)
-- ARM Master Trust, LLC, Series 2022-T1 Agricultural Loan Backed Notes, Class A, A (sf)
-- ARM Master Trust, LLC, Series 2022-T1 Agricultural Loan Backed Notes, Class B, 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 27, 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/355204). In connection with the finalization of the RFC Methodologies, the Integration Notice will be updated to remove the reference to the U.S. Agricultural Production Lending 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/402907.

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.