Morningstar DBRS Finalizes Provisional Credit Ratings to Renew 2024-1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following notes issued by Renew 2024-1

-- $145,930,000 Class A Notes rated AAA (sf)
-- $4,513,000 Class M Notes rated AA (sf)
-- $5,350,000 Class B Notes rated BBB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, “Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2023 Update,” published on December 19, 2023. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.
-- Transaction capital structure, proposed credit ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination, a liquidity reserve, and excess spread. Credit enhancement levels are sufficient to support the Morningstar DBRS-expected default, loss severity and prepayment assumptions under various stress scenarios.
-- Adequacy of additional reserve to support representation and warranty buyback obligations in the event that Renew does not/cannot honor its obligations.
-- The ability of the Transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the credit ratings on the Class A and Class M Notes address the timely payment of interest on a semi-annual basis and the payment of principal by the Legal Final Maturity. The credit rating on the Class B Notes addresses the payment of interest and principal by the Legal Final Maturity.
-- The capabilities of Renew with regard to originations and underwriting. Morningstar DBRS performed an operational review of Renew and considers the Company to be an acceptable originator of Property Assessed Clean Energy (PACE) Assessments.
-- The presence of Special District Services Inc. as backup program administrator.
-- The legal structure and presence of legal opinions that address the true sale of the PACE Assets to the Issuer, the nonconsolidation of the Issuer with the Depositor, that the Issuer has a valid first-priority security interest in the PACE Asset Portfolio, and consistency with the Morningstar DBRS methodology “Legal Criteria for U.S. Structured Finance.”
-- Review of legal considerations specific to PACE.
-- CSCDA had validation judgments issued by the California Superior Court that confirm that the PACE Bonds and underlying PACE Assessments are valid and enforceable obligations that conform to all federal and state laws. In addition, the judgments also ruled that the PACE Assessments do not constitute a taking of private property without due process of law in violation of the fifth and 14th Amendments to the U.S. Constitution or the California Constitution.
-- The FGFA had a validation judgment issued by Circuit Court of the Second Judicial Circuit in and for Leon County, Florida, that confirms that the PACE Assessments are valid and enforceable obligations that conform to all federal and state laws. In addition, the judgment also ruled, similar to the California validations, that the PACE Assessments do not constitute a taking of private property without due process of law in violation of the fifth and 14th Amendments to the U.S. Constitution or the Florida Constitution.
-- In its credit rating analysis, Morningstar DBRS considered recent legal actions in the State of Florida with respect to county tax collectors’ declining to add certain PACE Assessments originated through Florida PACE Funding Agency (FPFA) to the tax rolls. The FPFA is actively defending these actions, and believes it will prevail on the merits and obtain a judgment ordering relevant tax collectors to assess and collect the relevant PACE Assessments. To date, FGFA PACE assessments, and specifically those in the transactions, have not been affected.
-- Servicing is performed by local county tax collection offices.
-- Commingling risks associated with the servicing of PACE Assessments by local county tax collection offices in California and Florida are mitigated by the protections afforded special revenue collections under Chapter 9 of the U.S. Bankruptcy Code and certain structural features, including a County Reserve Account.

Morningstar DBRS’ credit ratings on the Class A, Class M, and Class B Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the Note Principal and Note Interest.

Morningstar DBRS’s credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS’s long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023; https://dbrs.morningstar.com/research/416784).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit rating is Rating U.S. Property Assessed Clean Energy (PACE) Securitizations (May 24, 2022; https://dbrs.morningstar.com/research/397234).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Operational Risk Assessment for U.S. ABS Servicers (July 20, 2023), https://dbrs.morningstar.com/research/417415
-- Operational Risk Assessment for U.S. ABS Originators (July 20, 2023), https://dbrs.morningstar.com/research/417416
-- Rating U.S. Structured Finance Transactions (October 30, 2023), https://dbrs.morningstar.com/research/422592
-- Legal Criteria for U.S. Structured Finance (December 7, 2023), https://dbrs.morningstar.com/research/425081
-- RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (August 31, 2023), https://dbrs.morningstar.com/research/420108

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.