DBRS Morningstar Confirms Fusion Trust, Series A, Class A Notes at R-1 (high) (sf)

DBRS Limited (DBRS Morningstar) confirmed the rating of the Series A, Class A Notes (the Notes) issued by Fusion Trust (the Trust) at R-1 (high) (sf). 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 conduit administered by National Bank Financial (NBF) that engages in traditional asset transactions. Assets and/or interests acquired by the Trust from sellers (the Assets) are subject to eligibility criteria and/or confirmation from DBRS Morningstar. As of December 31, 2022, the assets backing the Series A, Class A Notes consisted of investment loans (34.6%), equipment loans and leases (23.4%), conventional mortgages (20.5%), auto fleet (13.6%), auto loans (4.8%), and insured mortgages (NHA MBS and insured construction mortgages) (3.1%).

The rating confirmation is based on the following considerations:

-- 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.

-- The Notes benefit from a subordinated note placed with a third-party investor.

-- In addition to the internal credit enhancement and the subordinated note, the Notes benefit from external series-wide credit enhancement (SWCE). The SWCE is in the form of a letter of guarantee from National Bank of Canada (rated AA with a Stable trend by DBRS Morningstar), which is available to be drawn in the event that collections are insufficient to satisfy the obligations of the Trust relating to the Notes.

-- The liquidity facility meets DBRS Morningstar’s Global Liquidity Standard and is available to assist the Trust in the repayment of the Notes if the Trust is not able to issue new Notes to do so. The commitment amount equals at least 100% of the face value (including accrued interest) of all outstanding Notes.

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

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

-- DBRS Morningstar reviews all transactions prior to initial funding by the Trust.

-- The performance of the underlying collateral across all asset classes is strong.

-- NBF has significant experience in structuring, administering, and managing multi-asset and multiseller securitization programs.

The performance characteristics of the conduits are available and updated each month in DBRS Morningstar’s Monthly Canadian ABCP Report, which can be found on www.dbrsmorningstar.com.

ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (December 13, 2022; https://www.dbrsmorningstar.com/research/407359), 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 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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