Morningstar DBRS Finalizes Provisional Ratings on GoodGreen 2024-1 Ltd.

DBRS, Inc. (Morningstar DBRS) finalized its provisional ratings on the following notes issued by GoodGreen 2024-1 Ltd. (the Issuer or the Transaction):

-- $120,000,000 Class A rated AAA (sf)
-- $3,711,000 Class B rated AA (sf)
-- $2,900,000 Class C rated BBB (sf)

CREDIT RATING RATIONALE/DESCRIPTION

Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of a subordinated note, a liquidity reserve account, and excess spread.
-- Credit enhancement levels sufficient to support the Morningstar DBRS delinquency and loss severity assumptions under various stress scenarios.
-- The ability of the Transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. The ratings on the Class A Notes and the Class B Notes address the timely payment of interest on an annual basis and the repayment of principal by the Scheduled Maturity. The rating on the Class C Notes addresses the ultimate payment of interest and the repayment of principal by the Scheduled Maturity.
-- The capabilities of Ygrene with regard to originations and underwriting.
-- Morningstar DBRS performed an operational review of Ygrene and considers the Company to be an acceptable originator of PACE assessments.
-- DBRS Morningstar performed an operational review of Kawa and believes the company will be able to meet its obligations to purchase non-conforming assessments, for up to $2 million, for a period of 24 months following the end of the prefunding period. Morningstar DBRS considered the volume and frequency of historical repurchase occurrences and views the coverage as adequate.
-- The legal structure and presence of legal opinions that address the true sale of the assets, the nonconsolidation, that the Issuer has a valid security interest in the PACE Asset Portfolio, and consistency with Morningstar DBRS’ Legal Criteria for U.S. Structured Finance.
-- Review of legal considerations specific to PACE.
-- The Golden State Finance Authority had validation judgments issued by the California Superior Court that confirm that the PACE special tax liens and PACE Special Taxes are valid and enforceable obligations that conform to all federal and state laws. In addition, the judgments ruled that the PACE Assessments do not constitute a taking of private property without due process of law in violation of the Fifth and 14th Amendments to the U.S. Constitution or the California Constitution (see the Validation section, below).
-- Green Corridor had a validation judgment issued by the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida, confirming that the PACE Assessments are valid and enforceable obligations that conform to all federal and state laws. The judgment also ruled that the PACE Assessments do not constitute a taking of private property without due process of law in violation of the Fifth and 14th Amendments to the U.S. Constitution or the Florida Constitution (see the Validation section, below).
-- In its rating analysis, Morningstar DBRS considered recent legal actions in the State of Florida with respect to county tax collectors declining to add certain PACE Assessments originated through Florida PACE Funding Agency (FPFA) to the tax rolls. The FPFA is actively defending these actions and is seeking to obtain a judgment ordering relevant tax collectors to assess and collect the relevant PACE Assessments. To date, Green Corridor PACE assessments, and specifically those in the Transaction, have not been affected.
-- Servicing is performed by local county tax collection offices.
-- Commingling risks associated with the servicing of PACE Assessments by local county tax collection offices are mitigated by the protections afforded to special revenue collections under Chapter 9 of the U.S. Bankruptcy Code (the Code) and certain structural features, including a County Reserve Account.
-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2023 Update, published on December 19, 2023. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

Morningstar DBRS’ credit rating on Class A, Class B, and Class C addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are The associated financial obligations are the Note Principal and Note Interest.

Morningstar DBRS’ credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Class A and Class B interest on missed interest.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND 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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024; https://dbrs.morningstar.com/research/427030).

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

The principal methodology applicable to the credit rating is Rating U.S. Property Assessed Clean Energy (PACE) Securitizations (May 24, 2022; https://dbrs.morningstar.com/research/397234).

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

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.

Morningstar DBRS 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

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

-- Operational Risk Assessment for U.S. ABS Servicers (February 22, 2024),
https://dbrs.morningstar.com/research/428505

-- Operational Risk Assessment for U.S. ABS Originators (February 22, 2024),
https://dbrs.morningstar.com/research/428504

-- Rating U.S. Structured Finance Transactions (February 22, 2024),
https://dbrs.morningstar.com/research/428503

-- Legal Criteria for U.S. Structured Finance (December 7, 2023),
https://dbrs.morningstar.com/research/425081

-- RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (August 31, 2023), https://dbrs.morningstar.com/research/420108

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