DBRS Morningstar Confirms Bay Street Funding Trust’s Short-Term ABN, Series 1, Class A Notes at R-1 (high) (sf)

DBRS Limited (DBRS Morningstar) confirmed its rating of R-1 (high) (sf) on the Short-Term ABN, Series 1, Class A Notes (the Notes) issued by Bay Street Funding Trust (the Trust) as part of its annual review of publicly rated, asset-backed commercial paper conduits. The rating confirmation is part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

The Trust is a multi-seller, multi-asset securitization conduit administered by Scotia Capital Inc. (Scotia Capital). The Trust engages only in traditional asset transactions. Assets and/or interests the Trust acquires (the Assets) from sellers are subject to eligibility criteria and/or confirmation from DBRS Morningstar. As of April 30, 2023, assets consisted of auto loans (48.3%), residential mortgages (27.4%), residential rental equipment (11.0%), auto leases (6.8%), auto rental (3.9%), and auto fleet (2.5%).

RATING RATIONALE
The rating confirmation is based on the following considerations:

(1) Credit enhancement levels are consistent with similarly rated programs in Canada. Every transaction funded by the Notes has been independently structured to meet a AAA standard at inception on a stand-alone basis, unless other structural elements or mitigants acceptable to DBRS Morningstar are available to support that transaction, such as full wrap liquidity, to achieve that level.

(2) Liquidity facilities meet DBRS Morningstar’s Global Liquidity Standard and are available to assist the Trust in repaying the Notes if the Trust is not able to issue new Notes to do so. The commitment amount equals at least 102% of the face value (including interest) of all outstanding Notes.

(3) Minimum credit ratings of “A” or R-1 (low) or their equivalent for liquidity providers, credit enhancers, and hedge counterparties are required, unless they otherwise satisfy the Rating Agency Condition as defined in DBRS Morningstar’s “Legal Criteria for Canadian Structured Finance.”

(4) The Assets, through Securitization Agreements, are typically structured to be bankruptcy remote from the sellers, and the bankruptcy remoteness is supported by legal opinions.

(5) DBRS Morningstar reviews all transactions prior to initial funding by the Trust.

(6) The performance of the underlying collateral is strong.

(7) Scotia Capital has significant experience in the structuring, administering, and managing of multi-asset, multi-seller securitization programs.

Scotia Capital administers two multi-seller conduits with aggregate outstanding assets of $5,141,185,000 as of May 31, 2023.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) 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/416784 (July 4, 2023).

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

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 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 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.

The full report providing additional analytical detail is available at www.dbrsmorningstar.com.

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.

Rating Canadian ABCP and Related Enhancement Features (March 3, 2023)
https://www.dbrsmorningstar.com/research/410528

Legal Criteria for Canadian Structured Finance (June 20, 2023)
https://www.dbrsmorningstar.com/research/416101

Derivatives Criteria for Canadian Structured Finance (June 16, 2023)
https://www.dbrsmorningstar.com/research/415974

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.

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