Press Release

DBRS Morningstar Releases May 2023 Canadian ABCP and Enhanced ABCP Reports

ABCP
July 31, 2023

DBRS Limited (DBRS Morningstar) released the enhanced version of the Monthly Canadian ABCP Report (the Enhanced ABCP Report) in conjunction with the Monthly Canadian ABCP Report for the month ended May 31, 2023.

DBRS Morningstar provides the asset-backed commercial paper (ABCP) market data in Excel form.

The Enhanced ABCP Report offers additional metrics, longer data series, definitions, and charts that provide the user with both a numeric and a graphic presentation to allow for a quick review of the overall performance and trends for each transaction, as well as the benchmarking of transactions within an asset class.

The Enhanced ABCP Report can be accessed from the Monthly Canadian ABCP Report, once it has been downloaded to a desktop, by clicking on the specific deal number within each conduit.

As at May 2023, the total amount of ABCP notes outstanding decreased 2.2% to $41.8 billion from $42.7 billion in April 2023. The decrease is the result of a change in our reporting method. Starting from May 2023, we will report only the outstanding amounts of ABCP issued in the Canadian market.

During May 2023, there was one transaction added to the ABCP market:
-- One auto loan transaction (#94.0) was funded by Canadian Imperial Bank of Commerce’s (CIBC) conduits.

There were five transfers among The Toronto-Dominion Bank’s conduits:
-- Two auto loan transactions (#92.0 and #96.0) were transferred to Merit Trust from Prime Trust.
-- Two residential mortgage transactions (#80.0 and #86.0) were transferred to Prime Trust from Merit Trust.
-- One auto loan transaction (#91.0) was transferred to Reliant Trust from Prime Trust.

There were three maturities in May 2023:
-- One auto lease transaction (#51.0) funded by Bay Street Funding Trust.
-- One auto floorplan transaction (#50.0) funded by King Street Funding Trust.
-- One credit card transaction (#57.0) funded by SURE Trust.

Auto-related transactions represent the majority of total assets funded within ABCP conduits at 35.6%, followed by residential mortgage programs at 35.2%, and equipment finance at 8.4%.

Effective June 14, 2023, the liquidity support for each of the CIBC sponsored conduits, SAFE Trust, SOUND Trust, STABLE Trust, and SURE Trust (each a Conduit, together, the Conduits), was amended, changing from a Global Liquidity Standard (GLS) to full wrap liquidity. At CIBC’s request, DBRS Morningstar will continue to assess each proposed new transaction prior to the Conduit entering into it and monitor each transaction, as long as the Conduit remains a party to it. For more details, please see “CIBC Adds Full Wrap Liquidity to its ABCP-Issuing Conduits” at https://www.dbrsmorningstar.com/research/416409.

Credit performance in ABCP transactions remained strong; however, the inflationary pressures and heightened geopolitical risk will continue to add uncertainty. The Bank of Canada has raised the policy interest rate by 475 basis points (bps) to 5.00% since March 2022 to control inflation, which will continue to strain consumer finances and dampen demand. Nonetheless, DBRS Morningstar expects these downside risks to credit performance to be partially mitigated by a strong labour market, high consumer savings and net worth, the prime nature of obligors, and conservative assumptions coupled with high levels of credit enhancement available to noteholders.

The outstanding ABCP notes are well enhanced as of May 2023. DBRS Morningstar closely monitors the performance of all transactions and will continue to provide updates to the market.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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

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