Research: Rating Action: Moody’s Assigns Final Ratings to Structured Notes Issued by Mortgage Repurchase Agreement Financing Trust II Notes, Series 2022-1

0

New York, September 30, 2022 — Moody’s Investors Service (“Moody’s”) has assigned final ratings to two classes of bonds issued by Mortgage Repurchase Agreement Financing Trust II Notes, Series 2022-1 (“MRAFT II 2022-1”) ). The series has an outstanding balance of $200 million (subject to increase).

The full rating actions are as follows:

Issuer: Mortgage Repurchase Agreement Funding Trust Notes II, Series 2022-1

Class A Notes (Class A-1), final assigned rating A2

Class A Notes (Class A-2), final assigned rating A2

RATINGS RATIONALE

Mortgage Repurchase Agreement Financing Trust II Notes (Issuer), issued its second series (MRAFT II 2022-1) backed by a revolving warehouse facility with an expected redemption date of September 30, 2023.

The Issuer has the ability to increase the capital balance (“Upsize”) of MRAFT II 2022-1 subject to a number of conditions, including (i) the Trustee of the Indenture receiving written notice Upsize; (ii) the Trustee appointed by the Trust Indenture receives certain legal advice required under the Trust Indenture.

In addition, the administrator of the buyer (Credit Suisse First Boston Mortgage Capital LLC) will also have the right to modify the capital structure of the issuer in order to divide a series of bonds into one or more classes or categories (” rebalancing”). Rebalancing of the Notes will only be permitted if permitted under its respective supplement to the Indenture and any change in capital structure will preserve the pro rata pari-passu feature of the Notes and series outstanding in the Mortgage Buyout Agreement Funding Trust II. The consent of Noteholders will not be required for the rebalancing of Notes.

Following an event of amortization of the Notes, the Principal Amount of each series of Notes will be repaid on a pro rata basis. In addition, Class A Notes (Category A-1 and Category A-2) of MRAFT II 2022-1 will be paid in principal and interest on a pro rata basis.

Proceeds from the issuance of Series MRAFT II 2022-1 Bonds will generally be used to fund the purchase of eligible agency, non-agency QM (qualified mortgage), non-agency non-agency first mortgages. -QM with Credit Suisse AG, Cayman Islands Branch (the seller) under a master repurchase agreement. The seller, a branch of Credit Suisse AG (Credit Suisse, rated A2; negative outlook), will periodically sell eligible mortgages to the issuer and simultaneously agree to repurchase the same eligible mortgages from the issuer pursuant to a framework agreement redemption (the MRA ). The repurchase obligation is a full remedy against Credit Suisse, with Credit Suisse being liable for any capital shortfalls not covered by the sale of the qualifying mortgages.

The Notes are secured by the Issuer’s rights under the MRA as well as the purchased mortgages and related redemption assets. Although the Issuer’s payment obligations on the Notes are not directly guaranteed by Credit Suisse, the Seller’s payment obligations to the Issuer under the MRA correspond to the Issuer’s payment obligations under the deed of trust. Depending on the transaction documents, additional series of Notes may be issued in the future. Following an event of amortization of the Notes, the Principal Amount of each series of Notes will be repaid on a pro rata basis.

The notes in this transaction are floating rate notes, with coupons linked to the SOFR rate. Coupons are subject to an available funds rate cap and/or a net WAC rate cap.

We based the initial ratings of the notes on the long-term debt (LT) rating of Credit Suisse AG without increasing the mortgage collateral purchased through the master repurchase agreement because: 1) no third party verifies the presence of collateral documents or their eligibility, 2) the broad eligibility criteria could allow collateral with very poor credit quality, 3) there is no legal opinion confirming the issuer’s exclusive right to the collateral in the event of Credit Suisse’s insolvency and 4) the transaction does not have an independent director.

Although the initial rating of the Notes is primarily based on Credit Suisse AG’s long-term debt rating, following an indenture-related event of default, the rating will depend on the likelihood of value recovery of the guarantee and/or the insolvency estate of Credit Suisse by the final declaration. Maturity date and could be above or below Credit Suisse’s prevailing LT debt rating. The seller’s payment obligations under the MRA correspond to the issuer’s payment obligations under the indenture. In addition, the seller is required under the MRA to pay all fees and expenses of the issuer. As the repurchase obligation is a full recourse against Credit Suisse, we believe that any shortfall in the repurchase facility following the liquidation of the collateral will rank pari passu with the senior unsecured obligations of Credit Suisse.

The main methodology used in these ratings was “Moody’s Approach to Rating Repackaged Securities” published in June 2020 and available at https://ratings.moodys.com/api/rmc-documents/68357. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of ratings:

The rating of the rating is primarily based on Credit Suisse AG’s long-term (LT) debt rating. If Credit Suisse AG’s long-term debt rating is upgraded (or downgraded) after the closing date, the rating may also be upgraded (or downgraded). However, following an indenture-related event of default, the note’s rating will depend on the likelihood of recovery of the collateral value and/or Credit Suisse’s insolvency estate by the final maturity date shown and could be more or less than Credit Suisse’s prevailing long-term debt. Evaluation.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

Moody’s did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Pavan Prema Kumar
Assistant Vice President – Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Sonny Weng
VP – Senior Loan Officer/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Share.

Comments are closed.