DBRS Morningstar Finalizes Its Provisional Ratings on PACEWell 5 LLC

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by PACEWell 5 LLC (the Issuer):

-- $160,944,000 Class A rated AAA (sf)
-- $4,977,000 Class B rated AA (sf)
-- $7,301,000 Class C rated BBB (sf)

The ratings are based on DBRS Morningstar’s review of the following considerations:
--Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of a subordinated note (for the Class A notes), liquidity reserve, and excess spread.
--Credit enhancement levels sufficient to support the DBRS Morningstar-expected delinquency and loss severity assumptions under various stress scenarios.
--The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
--The capabilities of Greenworks Lending LLC with regard to originations and underwriting.
--DBRS Morningstar performed an operational review of Greenworks and considers it to be an acceptable originator of property assessed clean energy (PACE) assessments.
--The legal structure and presence of legal opinions that address the true sale of the assets to PACEWell 5 LLC, the nonconsolidation of the Issuer and Depositor with Greenworks, that the Issuer has a valid security interest in the PACE Asset Portfolio, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”
--Review of legal considerations specific to PACE.
--Servicing is performed by local county tax collection offices
--The ongoing Coronavirus Disease (COVID-19) pandemic. The analysis incorporated the impact of the coronavirus pandemic as follows:
--The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns December 2021 Update, published on December 9, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that recent COVID-19 developments, particularly the new Omicron variant with subsequent restrictions, combined with rising inflation pressures in some regions, may dampen near-term growth expectations in coming months. However, DBRS Morningstar expects the baseline projections will continue to point to an ongoing, gradual recovery. As such, DBRS Morningstar’s 2022 forecasts are little changed, while the newly added 2023 forecasts generally assume that growth will moderate toward long-term trends.

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 in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Property Assessed Clean Energy (PACE) Securitizations (July 31, 2019) which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

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