DBRS Morningstar Assigns Provisional Rating of R-1 (high) (sf) to Pure Grove Funding Series 1 Asset-Backed Commercial Paper Notes, Class Maple and Class Oak

DBRS Limited (DBRS Morningstar) assigned provisional ratings to the Series 1 Asset-Backed Commercial Paper Notes, Class Maple and Class Oak (collectively, the Notes) of Pure Grove Funding (the Trust) at R-1 (high) (sf).

RATING RATIONALE/DESCRIPTION
The Trust is a multiseller, multi-asset securitization conduit administered by the Royal Bank of Canada (RBC; rated AA (high) with a Stable trend by DBRS Morningstar). The Trust will engage in traditional asset transactions only.

The provisional rating is based on the following considerations:
(1) Credit enhancement levels are consistent with similarly rated programs in Canada. From inception, each transaction will be structured to achieve a AAA standard on a stand-alone basis (unless other structural elements or mitigants that are acceptable to DBRS Morningstar are available to that transaction, such as programwide credit enhancement (PWCE), enhanced liquidity, or fullwrap 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. Third-party credit enhancement is provided to the Trust by RBC in the form of PWCE in an amount up to the greater of (i) 10% of the outstanding Notes (other than transactions supported by wrapped liquidity) and (ii) the largest transaction limit (other than transactions supported by wrapped liquidity). Because of certain events of default associated with drawings in excess of 20% of the PWCE, DBRS Morningstar will only allocate a maximum of 20% of available PWCE to enhance the ratings of transactions. As at March 20, 2020, there were no transactions funded through the Trust that relied on PWCE.
(3) Liquidity facilities meet DBRS Morningstar’s 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 DBRS Morningstar or their equivalent for liquidity providers, credit enhancers, and hedge counterparties are required, unless otherwise approved by DBRS Morningstar.
(5) DBRS Morningstar will review all transactions prior to initial funding by the Trust.
(6) The assets backing the notes, through securitization agreements, will be structured to be bankruptcy remote from the sellers and the bankruptcy remoteness is supported by legal opinions.
(7) RBC has significant experience in structuring, administering, and managing multi-asset, multiseller securitization programs.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodologies are Rating Canadian ABCP and Related Enhancement Features (March 18, 2020) and Legal Criteria for Canadian Structured Finance (June 29, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

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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