DBRS Morningstar Confirms Canadian Master Trust’s Series A Notes at R-1 (high) (sf)

DBRS Limited (DBRS Morningstar) confirmed the rating of the Series A Notes (the Notes) issued by Canadian Master Trust (the Trust) at R-1 (high) (sf) as part of its annual review of publicly rated asset-backed commercial paper conduits. The confirmation is part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

The Trust is a multiseller, multi-asset securitization program administered by BMO Nesbitt Burns Inc. (BMO NB). The Trust engages in traditional asset transactions. Assets and/or interest acquired by the Trust from sellers (the Assets) are subject to eligibility criteria and/or confirmation from DBRS Morningstar. As of February 28, 2021, the Assets consisted of auto loans (34.0%), auto fleet (20.6%), conventional mortgages (13.6%), franchise loans (12.9%), auto leases (11.9%), insured mortgages (4.5%), and commercial mortgages (2.5%).

RATING RATIONALE
DBRS Morningstar considered additional analysis and, where appropriate, additional adjustments to the expected performance of funded transactions, as a result of the global efforts to contain the spread of the Coronavirus Disease (COVID-19) pandemic. DBRS Morningstar initially published its outlook on the impact on key economic indicators for the 2020–22 time frame in April 2020. The scenarios were updated on March 17, 2021. For details, please see “Global Macroeconomic Scenarios: March 2021 Update.” For the confirmed rating, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary.

The rating confirmation is based on the following considerations:

(1) Credit enhancement levels are consistent with similarly rated programs in Canada. From inception, every transaction funded by the Notes has been independently structured to meet a AAA standard.

(2) The liquidity facility available to the Trust meets DBRS Morningstar’s global liquidity standard and is available to assist the Trust in repaying interest and principal on maturing Notes and/or to honour funding obligations in the event that the Trust is not able to issue new Notes to do so. The commitment amount equals at least the face value (including interest) of all outstanding Notes.

(3) Minimum credit ratings of “A” or R-1 (low) by DBRS Morningstar (or equivalent) for liquidity providers, credit enhancers, and hedge counterparties are required, unless the Rating Agency Condition is otherwise satisfied.

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

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

(6) The performance of the underlying collateral across all asset classes funded is strong.

(7) BMO NB has significant experience in structuring, administering, and managing multi-asset, multiseller securitization programs.

BMO NB administers two publicly rated multiseller conduits with aggregate outstanding amounts of $4,389,445,858 as of February 28, 2021.

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:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (August 31, 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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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