DBRS Morningstar Confirms Ratings on PACEfunding 2020-1

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes of securities issued by PACEfunding 2020-1 (the Issuer) as follows:

-- Class A, Series 2020-1 at AAA (sf)
-- Class B, Series 2020-1 at AA (sf)
-- Class C, Series 2020-1 at BBB (sf)

The rating actions are based on the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on March 17, 2021, and are reflected in DBRS Morningstar’s rating analysis.

-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery in 2021.

-- The pandemic is expected to have limited impact on residential property assessed clean energy (R-PACE) transactions because R-PACE assessments are paid at the same priority as property taxes.

-- Legal considerations specific to PACE including validity in all relevant jurisdictions. The obligation to pay the PACE assessments is transferable. When a property is sold, the new owner is responsible for any outstanding PACE assessments and payment penalties as part of the purchase of the property. Additionally, protections are afforded to special revenue collections under Chapter 9 of the U.S. Bankruptcy Code and certain structural features, including a County Reserve Account, mitigate commingling risks associated with the servicing of PACE assessments by local county tax collection offices.

-- The transaction benefits from credit enhancement in the form of overcollateralization, a reserve account, and excess spread. The senior note also benefits from subordination from the lower class. The transaction has withstood stressed cash flow assumptions.

ESG CONSIDERATIONS
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/373262.

Notes:
The principal methodology is DBRS Morningstar Master U.S. ABS Surveillance (May 27, 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did not 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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