DBRS Ratings Limited (DBRS Morningstar) placed the provisional ratings of the 11 tranches of the unexecuted, unfunded financial guarantee regarding the Colonnade Programme - Series Global 2018-5 (Colonnade Global 2018-5) portfolio Under Review with Negative Implications (UR-Neg.).
The transaction is a synthetic balance-sheet collateralised loan obligation structured in the form of a financial guarantee (the Guarantee). The tranches are collateralised by a portfolio of corporate loans and credit facilities (the Guaranteed Portfolio) originated by Barclays Bank PLC (Barclays or the Beneficiary). The rated tranches are unfunded and the senior guarantee remains unexecuted.
The ratings address the likelihood of a loss under the guarantee on the respective tranche resulting from borrower defaults at the legal final maturity dates of each transaction. Borrower default events are limited to failure to pay, bankruptcy, and restructuring events. The ratings assigned by DBRS Morningstar to each tranche are expected to remain provisional until the senior guarantee is executed. The ratings do not address counterparty risk nor the likelihood of any event of default or termination events under the agreement occurring.
KEY RATING DRIVERS AND CONSIDERATIONS
On 18 May 2020, DBRS Morningstar published a commentary outlining how the Coronavirus Disease (COVID-19) is likely to affect DBRS Morningstar-rated Structured Credit transactions in Europe. For more details, please see:
https://www.dbrsmorningstar.com/research/361098/european-structured-credit-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap, where DBRS Morningstar discussed the overall risk exposure of the Structured Credit sector to the coronavirus and provided a framework for identifying the transactions that are more at risk and likely to be affected by the fallout of the pandemic on the economy. In synthetic risk transfer transactions, the portfolios tend to be more bespoke and defined around both protection buyer's regulatory capital optimisation needs as well as protection seller risk and sector preferences. The Colonnade Global 2018-5 transaction is still in its revolving period ending in December 2021. DBRS Morningstar’s assessment of the risk of the revolving portfolio is based on a worst-case composition as per the replenishment criteria. DBRS Morningstar’s review found that 2.0% and 23.5% of the outstanding portfolio balance as of 28 May 2020 belonged to industries classified in mid-high and high risk economic sectors, respectively as per the commentary mentioned above.
DBRS Morningstar typically endeavours to resolve the status of ratings UR-Neg.as soon as appropriate. If heightened market uncertainty and volatility persist, DBRS Morningstar may extend the Under Review status for a longer period of time.
On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were updated on 1 June 2020. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/361867/global-macroeconomic-scenarios-june-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar’s analysis considered impacts consistent with the moderate scenario in the referenced reports.
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.
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.
All figures are in U.S. dollars unless otherwise noted.
The principal methodology applicable to the ratings is “Rating CLOs and CDOs of Large Corporate Credit” (28 February 2020).
DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found at: http://www.dbrsmorningstar.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include reference registries and portfolio reports provided by Barclays.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on the transaction took place on 25 October 2019 when DBRS Morningstar confirmed all the provisional ratings.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.
Ratings are Under Review with the Negative Implications designation. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. If heightened market uncertainty and volatility persist, DBRS Morningstar may extend the Under Review status for a longer period of time. Sensitivity analysis is not applicable.
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml
Ratings assigned by DBRS Ratings Limited are subject to EU and U.S. regulations only.
Lead Analyst: Natalia Coman, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 21 December 2018
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.
-- Rating CLOs and CDOs of Large Corporate Credit (28 February 2020) and CLO Asset Model v2.2.3, https://www.dbrsmorningstar.com/research/357452/rating-clos-and-cdos-of-large-corporate-creditporate-credit-securitizations
-- Master European Structured Finance Surveillance Methodology (22 April 2020),
--Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (11 March 2020), https://www.dbrsmorningstar.com/research/357853/mapping-financial-institution-internal-ratings-to-dbrs-morningstar-ratings-for-global-structured-credit-transactions
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019),
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020), https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020), https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375
For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at firstname.lastname@example.org.