Morningstar DBRS Confirms Lakeshore Trust's Series 1 Asset-Backed Commercial Paper Notes at R-1 (high) (sf)

DBRS Limited (Morningstar DBRS) confirmed the credit rating on the Series 1 Asset-Backed Commercial Paper Notes (the Notes) issued by Lakeshore Trust (the Trust) at R-1 (high) (sf) as part of its annual review of publicly rated asset-backed commercial paper (ABCP) conduits. The confirmation is part of Morningstar DBRS' 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 the Royal Bank of Canada (RBC; rated AA (high) with a Stable trend by Morningstar DBRS). The Trust engages in only traditional asset transactions. Assets and/or interests acquired by the Trust from sellers (the Assets) are subject to eligibility criteria and/or confirmation from Morningstar DBRS. As of July 31, 2024, assets consisted of residential mortgages (65.6%), equipment finance (18.3%), auto rental (10.8%), and auto floorplan (5.3%).

The rating confirmation is based on the following considerations:

(1) Credit enhancement levels are consistent with similarly rated programs in Canada. From inception, each transaction is structured to achieve a AAA standard on a stand-alone basis (unless other structural elements or mitigants that are acceptable to Morningstar DBRS are available to that transaction, such as program-wide credit enhancement (PWCE), enhanced liquidity, or full-wrap liquidity to achieve that level).

(2) In addition to the internal credit enhancement, all transactions in the Trust have third-party enhancement available to maintain the R-1 (high) (sf) rating on the Notes. RBC provides third-party credit enhancement to the Trust in the form of PWCE in an amount up to 10% of the outstanding Notes (other than transactions supported by wrapped liquidity). Because of certain events of default associated with drawings exceeding 20% of the PWCE, Morningstar DBRS will allocate only a maximum of 20% of the available PWCE to enhance the ratings of transactions. As at July 31, 2024, none of the transaction funded by the Trust relied on PWCE to meet a AAA standard.

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

(4) Minimum credit ratings of "A" or R-1 (low) by Morningstar DBRS or their equivalent for liquidity providers, credit enhancers, and hedge counterparties are required, unless the Rating Agency Condition is otherwise satisfied, as defined in Morningstar DBRS' "Legal and Derivatives Criteria for Canadian Structured Finance."

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

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

(7) The performance of the underlying collateral across all asset classes is within Morningstar DBRS expectations.

(8) RBC has significant experience in structuring, administering, and managing multi-asset, multi-seller securitization programs. RBC administers four multi-seller conduits in Canada, with an aggregate CAD ABCP face amount of $6,352,437,505 as at July 31, 2024.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 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 Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

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 (August 6, 2024), https://dbrs.morningstar.com/research/437538.

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 info-DBRS@morningstar.com.

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.

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 by clicking on the link under Related Documents below or by contacting us at Info-DBRS@morningstar.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://dbrs.morningstar.com/about/methodologies.
-- Rating Canadian ABCP and Related Enhancement Features (February 27, 2024)
https://dbrs.morningstar.com/research/428658
-- Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024)
https://dbrs.morningstar.com/research/437761
-- Operational Risk Assessments for Canadian Structured Finance (August 6, 2024)
https://dbrs.morningstar.com/research/437547

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

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