Morningstar DBRS Takes Credit Rating Actions on Cubitt Global, LLC

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on all outstanding notes issued by Cubitt Global LLC (the Issuer) to C (sf) from AA (sf). Additionally, the credit ratings on all outstanding notes have been discontinued and withdrawn. The downgrade resulted from the insufficient level of insured eligible assets to support the full repayment on the outstanding notes and the discontinued-withdrawn rating action is due to the presence of less than sufficient data and information as noted herein. Concurrently, the credit ratings have been removed from Under Review with Negative Implications (URN), where they were placed on May 10, 2024. Separately, the issuer requested Morningstar DBRS to withdraw all outstanding credit ratings issued by Cubitt Global LLC.

The credit rating actions are based on the following analytical considerations:

-- On May 10, 2024, Morningstar DBRS placed all outstanding notes issued by Cubitt Global LLC, on Under Review with Negative Implications based on a notification received of an Event of Default (EOD) and the need to obtain further information to determine the impact on the outstanding notes for the transaction.

-- The EOD Notice refers to a missed payment of £10,000,000, as well as additional EODs, including the failure to deliver audited consolidated financial statements, failure to deliver settlement reports, acquiring noneligible receivables, failure to ensure all receivables are insured receivables, and failure to purchase eligible receivables from the purchaser.

-- Since the last rating action on May 10, 2024, Morningstar DBRS received the latest portfolio information on Cubitt, which shows that an insufficient amount of insured eligible assets is available in the portfolio. The insurance policy, which covers 100% of defaulted receivables, is the primary credit support for the transaction. Currently, the insurance coverage is insufficient to support the full repayment of the outstanding notes because of lack of sufficient eligible assets covered by the insurance policy.

-- Given the insufficient level of insured eligible assets to support the full repayment of the outstanding notes, in accordance with the applicable Morningstar DBRS credit rating methodology, imminent default is expected. As such, the credit ratings on all the outstanding notes have been downgraded to ‘C’ (sf).

-- The program manager of the transaction, Petra Management Limited, communicated to Morningstar DBRS that the parties to the transaction entered into a Cubitt Interim Remediation Agreement (CIRA) related to the notes that purportedly details an agreed upon plan to redeem the notes and amend the terms of one or more series of notes issued by Cubitt. The program manager, on the advice of counsel, has declined to provide the CIRA to Morningstar DBRS. As a result, the ratings have also been discontinued-withdrawn due to the presence of less than sufficient data and information.

-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, “Baseline Macroeconomic Scenarios for Rated Sovereigns March 2024 Update,” published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

Notes:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (May 08, 2024), https://dbrs.morningstar.com/research/432485.

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

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

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

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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 (March 21, 2024),
https://dbrs.morningstar.com/research/430003
-- Operational Risk Assessment for U.S. ABS Originators (March 21, 2024),
https://dbrs.morningstar.com/research/430004
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024),
https://dbrs.morningstar.com/research/428623
-- Legal Criteria for U.S. Structured Finance (April 15, 2024),
https://dbrs.morningstar.com/research/431205
-- Rating U.S. Structured Finance Transactions (April 15, 2024),
https://dbrs.morningstar.com/research/431204

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.