DBRS Morningstar Downgrades Rating on MARLF-Liquidity Agreement Within Mountcliff Funding LLC to A (high) (sf) from AA (low) (sf)

DBRS, Inc. (DBRS Morningstar) downgraded the rating on MARLF-Liquidity Agreement within Mountcliff Funding LLC concurrent with the review of modifications to the terms of the underlying facility to A (high) (sf) from AA (low) (sf).

The rating rationale includes the following key analytical considerations:
-- The contemplated amendments to certain terms of the underlying timeshare loan transaction, which have been reviewed by DBRS Morningstar.
-- The underlying timeshare loan transaction that the MARLF-Liquidity Agreement supports is a revolving warehouse that incorporates structural features, including a monthly borrowing base test; performance-related triggers (delinquency and default) that, if breached, would result in the termination of the revolving period and the amortization of the facility; and the dynamic credit enhancement, which is based on obligor FICO scores.
-- DBRS Morningstar's assessment of how collateral performance could deteriorate because of macroeconomic stresses brought about by the Coronavirus Disease (COVID-19) pandemic. As the pandemic spreads and its consequences unfold, it is difficult to anticipate the ultimate impact on the variables that drive credit quality. In the context of this highly uncertain environment and in the interest of transparency, DBRS Morningstar released a set of forward-looking macroeconomic scenarios for select economies related to the coronavirus in a commentary titled, “Global Macroeconomic Scenarios: Implications for Credit Ratings,” on April 16, 2020. The moderate and the adverse scenarios are being used in the context of DBRS Morningstar’s rating analysis, with the moderate scenario serving as the primary anchor for current ratings and the adverse scenario serving as a benchmark for sensitivity analysis.
-- DBRS Morningstar’s moderate scenario assumes some success in containment within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. This moderate scenario primarily considers two economic measures: declining GDP growth and increased unemployment levels for the year.
-- The collateral performance to date and DBRS Morningstar's assessment of future performance, including upward revisions to the expected loss assumptions in consideration of the expected unemployment levels in the moderate scenario. Additional rating considerations related to coronavirus include stress on the travel and tourism sectors, such as mandated nonessential business closures that result in the closure of hospitality properties, including a majority of timeshare resorts.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is the DBRS Master U.S. ABS Surveillance Methodology (July 31, 2019), 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 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.

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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