DBRS Morningstar Confirms Ratings of Fortified Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the outstanding Real Estate Secured Line of Credit-Backed notes (the Notes) issued by Fortified Trust as part of DBRS Morningstar’s continued efforts to provide timely credit rating opinions and increased transparency to market participants. The confirmed ratings are as follows:

-- Class A Notes, Series 2019-1 at AAA (sf)
-- Class B Notes, Series 2019-1 at AA (high) (sf)
-- Class C Notes, Series 2019-1 at A (high) (sf)

-- Class A Notes, Series 2021-1 at AAA (sf)
-- Class B Notes, Series 2021-1 at AA (high) (sf)
-- Class C Notes, Series 2021-1 at A (high) (sf)

-- Class A Notes, Series 2022-1 at AAA (sf)
-- Class B Notes, Series 2022-1 at AA (high) (sf)
-- Class C Notes, Series 2022-1 at A (high) (sf)

-- Class A Notes, Series 2023-1 at AAA (sf) (together with the Class A Notes, Series 2019-1; the Class A Notes, Series 2021-1; and the Class A Notes, Series 2022-1, the Class A Notes)
-- Class B Notes, Series 2023-1 at AA (high) (sf) (together with the Class B Notes, Series 2019-1; the Class B Notes, Series 2021-1; and the Class B Notes, Series 2022-1, the Class B Notes)
-- Class C Notes, Series 2023-1 at A (high) (sf) (together with the Class C Notes, Series 2019-1; the Class C Notes, Series 2021-1; and the Class C Notes, Series 2022-1, the Class C Notes)

The rating actions are based on the following factors as of May 2023:

(1) The levels of credit enhancement provided by subordination (3.9% and 1.9% for the Class A Notes and Class B Notes, respectively), the Cash Reserve Account with a current balance of zero, and current excess spread of 1.36% for the Series 2019-1 Notes and the Series 2021-1 Notes, 1.40% for the Series 2022-1 Notes and 1.38% for the Series 2023-1, annually. The Cash Reserve Account can build up to 1.35% minus the three-month excess spread if the three-month excess spread falls below 0.95%.

(2) Performance of the underlying collateral remains stable and within expectations, with the monthly payment rate standing at 4.9%. The three-month average net loss ratio was nil as of May 2023.

(3) The Notes benefit from 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 pool comprise a well-diversified portfolio of home equity line of credit (HELOC) accounts with a minimum of 20% equity in each of the mortgaged properties, which secures the HELOC accounts.

The Bank of Montreal (BMO) is the servicer of the assets in the collateral pool. BMO is one of Canada’s largest banks by assets and is currently rated AA/R-1 (high) by DBRS Morningstar.

The performance and characteristics of the collateral pool and the Notes are available and updated each month in the Monthly Canadian ABS Report available at www.dbrsmorningstar.com.

DBRS Morningstar’s credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are listed at the end of this Press Release.

DBRS Morningstar’s credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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 https://www.dbrsmorningstar.com/research/416784 (July 4, 2023).

Notes:
All figures are in Canadian dollars unless otherwise noted.

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 principal methodology applicable to the credit rating is Master Canadian Structured Finance Surveillance Methodology (June 7, 2023; https://www.dbrsmorningstar.com/research/415503).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/410863.

Financial Obligations:
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2019-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2019-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2019-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2019-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2019-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2019-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2021-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2021-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2021-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2021-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2021-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2021-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2022-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2022-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2022-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2022-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2022-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2022-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2023-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class A Notes, Series 2023-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2023-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class B Notes, Series 2023-1, Principal Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2023-1, Interest Amount
Real Estate Secured Line of Credit-Backed Class C Notes, Series 2023-1, Principal Amount

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