DBRS Morningstar Global Structured Finance Rating Methodologies and Coronavirus Disease (COVID-19)

DBRS Morningstar notes that on March 11, 2020, the World Health Organization (WHO) declared the Coronavirus Disease (COVID-19) outbreak a global pandemic. Effects on the global economy are beginning to take hold, notably in places where the number of cases has precipitously increased, but also in places where local authorities have increased their efforts to contain the outbreak.

DBRS Morningstar structured finance rating methodologies typically apply rating stresses on portfolio/pool cash flows and/or collateral values to determine whether a securitized instrument can be repaid in full in accordance with its terms. After assignment of an initial rating(s), DBRS Morningstar monitors the level of actual stress(es), if any, experienced and takes subsequent rating actions, as appropriate.

With regard to the coronavirus, the magnitude and extent of performance stress posed to global structured finance transactions remains highly uncertain. This considers the fiscal and monetary policy measures and statutory law changes that have been implemented or will be implemented to mitigate the impact of the pandemic on global economies. However, some regions, jurisdictions, and asset classes are affected more immediately. Accordingly, DBRS Morningstar may apply additional short-term stresses to its rating analysis; for example, by front-loading default expectations and/or assessing the liquidity position of a structured finance transaction through the application of more stressful operational risk and/or cash flow timing considerations.

Only in the coming months and quarters will global structured finance performance data reveal the level of performance stress posed on outstanding transactions.

Notes:
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 on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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