DBRS Morningstar Confirms Rating on Credit Default Swap of Commodore CDO IV, Ltd.

DBRS, Inc. (DBRS Morningstar) confirmed its AA (sf) rating on Commodore CDO IV, Ltd.’s (Commodore) counterparty credit risk with respect to its ability to make any and all payments due under the Credit Default Swap confirmations governed by the ISDA Master Agreement, dated August 19, 2005, between Deutsche Bank AG (rated A (low) with a Positive trend by DBRS Morningstar) and Commodore.

RATING RATIONALE
The rating action is a result of the annual surveillance review of the transaction. DBRS Morningstar confirmed the rating on Commodore because the current transaction performance is within DBRS Morningstar’s expectation.

In its analysis, DBRS Morningstar considered the following aspects of the transaction:

(1) The transaction’s capital structure and the form and sufficiency of available collateral in the synthetic security collateral account (the Account).
(2) The credit quality of the collateral in the Account, subject to the definition of Eligible Investments.
(3) The legal structure as well as legal opinions addressing certain matters of Commodore and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance” methodology.

As of December 5, 2022, the transaction had $4,066,671.09 of synthetic securities outstanding, 44.53% of which were Home Equity Loan securities, followed by 18.89% of Residential B/C Mortgage securities, which were sufficiently covered by $4,066,671.09 in the Account.

The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2022 Update,” published on December 21, 2022 (https://www.dbrsmorningstar.com/research/407678). These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the Coronavirus Disease (COVID-19), please see its May 18, 2020, commentary, “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” at https://www.dbrsmorningstar.com/research/361112.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies applicable to the rating are Rating Structured Finance CDO Restructurings (https://www.dbrsmorningstar.com/research/369961; November 12, 2020) and Legal Criteria for U.S. Structured Finance (https://www.dbrsmorningstar.com/research/407008; December 7, 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

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.

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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Legal Criteria for U.S. Structured Finance (https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance; December 7, 2022)

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