Current rating | ||||
---|---|---|---|---|
ABCP notes(i) | A-1 (sf) | |||
(i)The ABCP notes can be issued at a discount or on an interest-bearing basis at a fixed rate. The ABCP is denominated in U.S. dollars. ABCP--Asset-backed commercial paper. |
Rationale
S&P Global Ratings' 'A-1 (sf)' short-term rating on CRC Funding LLC's (CRC) U.S. dollar-denominated asset-backed commercial paper (ABCP) notes is primarily based on:
- The program's legal structure, including CRC's intended bankruptcy-remote status;
- The program-level general liquidity agreement and the transaction-level liquidity support provided by the secondary market agreement (SMA);
- The liquidity and credit support providers and hedge counterparties, which are rated 'A-1' or higher; and
- Citibank N.A.'s (Citibank) experience and ability as program administrator to carry out day-to-day services for CRC, administer the issuance and maturity of ABCP, and draw on liquidity and credit facilities to repay ABCP on a timely basis.
Environmental, Social, And Governance
The assets funded in partially supported ABCP programs may have material exposure to environmental, social, and governance (ESG) credit factors if they influence our liquidity-enhanced credit analysis. Support providers in ABCP conduits are typically highly rated financial institutions, and our assessment of their creditworthiness incorporates any material ESG credit factors. Please refer to our U.S. and Canadian, EMEA, Asia-Pacific, and Latin American bank ESG industry report cards for additional information: ESG report cards.
Program Structure
The chart below shows an overview of the program structure.
Chart 1
Key Features
Liability issuance
CRC is a bankruptcy-remote special-purpose entity and limited liability company incorporated under Delaware law to issue U.S. dollar-denominated standard (nonredeemable) ABCP notes.
CRC can issue standard ABCP notes with a tenor of 397 days. The notes can be issued at a discount or interest-bearing basis at a fixed rate to fund eligible financial assets. We review on a case-by-case basis CRC's exposure to legal liabilities that may arise from owning equities or non-financial (operating) assets.
Program Overview
Program details | ||||
---|---|---|---|---|
Conduit name | CRC Funding LLC | |||
Conduit type | Multiseller | |||
Sponsor | Citibank N.A. | |||
Administrator | Citibank N.A. | |||
Maximum program limit | $31 billion | |||
Support type | Partial | |||
Review status | All transactions funded in CRC (including program- and transaction-level amendments) are reviewed by S&P Global Ratings. | |||
Preference risk | Transaction level coverage in various ways, including an officer's certificate, ordinary course of business representations, security interest opinions, or true sale opinions. | |||
Bankruptcy remoteness | Opinions, as applicable, were reviewed as part of CRC LLC's bankruptcy-remoteness status under Delaware law. | |||
Amount of PWCE | 10% of invested amount | |||
Rating dependent participants | ||||
LOC provider | Citibank N.A. | |||
Liquidity provider | Citibank N.A. | |||
FX counterparty | Citibank N.A. | |||
Bank account provider | Citibank N.A. | |||
Support provider | Citibank N.A. | |||
Non-rating dependent participants | ||||
Issuing and paying agent | Citibank N.A. | |||
Depositary | Citibank N.A. | |||
Trustee | Deutsche Bank Trust Co. Americas | |||
FFELP--Federal Family Education Loan Program. PWCE--Program-wide credit enhancement. ABCP--Asset-backed commercial paper. LOC--Letter of credit. |
Counterparty/Credit Quality
Liquidity support
Program-specific. Citibank provides a $2.5 billion committed program-level general liquidity agreement, under which the available commitment may be transferred to other banks, subject to 'A-1' rating requirements and other provisions. This general liquidity is available in addition to the pool-specific liquidity support.
Pool-specific. CRC benefits from liquidity support typically in the form of SMA. Citibank and other liquidity providers rated at least 'A-1' provide transaction-specific liquidity. For each receivables facility, CRC arranges and enters into a transaction-specific liquidity facility sized to at least 100% of the facility limit of the receivables facility.
Under each liquidity agreement, CRC has the right to draw liquidity at any time on a nonrecourse basis.
For partially supported liquidity agreements, the liquidity providers typically fund for capital (the amount advanced by CRC to the seller) plus interest accrued to the maturity of ABCP and reduce for defaulted receivables. A funding shortfall occurs if defaulted receivables exceed the transaction-specific credit enhancement, which would leave CRC short of the amount needed to pay commercial paper in full. This risk is mitigated by the various levels of credit support and the administrator's surveillance procedures. Each partially supported pool financed by CRC is analyzed by S&P Global Ratings to a credit quality level consistent with an 'A-1' rating.
Credit support
Program-specific. Credit support for CRC is provided by Citibank in the form of a program letter of credit (LOC). This is for an amount equal to 10% of invested amount.
Pool-specific. Pool-specific credit support is determined on a transaction-by-transaction basis. It may be carried out at the level of each purchasing company and may take the form of irrevocable LOCs, overcollateralization, reserve account, or another form.
Interest rate protection
Liquidity facilities fund for interest accrued to the maturity of ABCP.
Foreign exchange hedging
CRC funds its purchase with ABCP in U.S. dollars, but can purchase receivables pools denominated in multiple foreign currencies. CRC enters into hedge agreements with Citibank N.A. as a hedge counterparty to hedge the currency risk between the non-U.S. dollar assets and the U.S. dollar commercial paper governed under the ISDA agreement.
Legal
Substantive consolidation
CRC is a limited liability company organized in Delaware. CRC Member Corp. a Delaware corporation is the sole owner/equity member of CRC. CRC has been found in our analysis to be consistent with S&P Global Ratings' bankruptcy-remoteness criteria. Opinions, as applicable, were reviewed as part of CRC's bankruptcy-remoteness status under Delaware law.
Clawback/preference risk
ABCP investors are insulated from legal risks associated with a seller bankruptcy or with preference risk. This is documented in various ways:
- A certificate from an officer of the ABCP issuer (or its administrator) to the effect that the ABCP issuer has received satisfactory true sale or security interest opinions;
- A representation as to the satisfaction of the ordinary course of business defense from the transferor and transferee of the applicable transfer (other than the ABCP issuer) in the transaction;
- A security interest opinion and representations and warranties in the transaction documents regarding security interest issues not covered by such an opinion; or
- A true sale opinion with respect to the applicable transfer.
The liquidity facility further protects ABCP from commingling risk by funding for collections that have been received by the seller/servicer, but not yet remitted to CRC. Furthermore, the contracts that support the conduit's operations provide for structural protections that isolate the assets from the bankruptcy of entities involved in each transaction and ensure full and timely payment of ABCP.
Cash Flow And Payment Structure
Liability issuance tests
The conditions necessary for CRC to issue ABCP include, but are not limited to:
- The aggregate credit support amount available to CRC shall not be less than 10% of the aggregate amount of capital of all receivable interests then owned by the company;
- Any provider of credit support shall not have defaulted in the performance of its obligations;
- CRC, Citibank, or any of its affiliates shall not have commenced a voluntary case under applicable federal or state bankruptcy, insolvency, or similar law in effect;
- After giving effect to the issuance of ABCP notes, such issuance would not cause the outstanding principal amount (or face amount less discount) of the ABCP notes to exceed the sum of the aggregate available and unused liquidity capacity of CRC plus the principal amount of other permitted investments then owned by CRC plus any accrued amounts owing to CRC;
- If such issuance (after giving effect to the use of proceeds thereof to pay maturing ABCP notes, borrowings under the short-term borrowing facilities and other indebtedness of CRC for borrowed money) would cause the aggregate face amount (or principal amount) of the ABCP notes, borrowings under the short-term borrowing facilities and other indebtedness of CRC for borrowed money outstanding to exceed $31,000,000,000; and
- Such ABCP notes would mature no later than the 397th day following the date of such receipt.
Conduit wind-down events
CRC has a number of events outlined in the program documents that would lead to a conduit wind-down, including:
- Failure to pay principal or interest on any note when due and such failure remains uncured for five business days;
- Bankruptcy or insolvency of CRC; and
- Acceleration of any other obligations of CRC under any liquidity facility or any failure to pay any obligations of CRC under any liquidity facility at final maturity and such failure continues after the applicable grace period.
Waterfall/payment priority
Upon the occurrence of a liquidation event, the collateral agent shall apply the proceeds of the collateral in the following priority:
- Trustee fees not to exceed $300,000; then
- Pay pro rata: outstanding ABCP notes; outstanding liquidity obligations related to the liquidity facilities supporting the ABCP notes; derivative obligations related to the collateral; and amounts provided to CRC under one or more secured loan or credit facilities; then
- Pay all of the issuing and paying agent obligations; then
- Pay trustee obligations in excess of the capped amount; then
- Pay amounts owing the operating agent and the collateral agent, pro rata, until paid in full; and then
- Amounts payable to CRC or at its direction.
Operational Risk
Review status
All transactions funded in CRC (including program and transaction-level amendments) are reviewed by S&P Global Ratings.
Administrator review
The program administrator's experience and past performance are factors in the ratings process. We conduct ongoing administrator business reviews to evaluate Citibank N.A.'s ability to carry out responsibilities under the program documents such as:
- Originating and structuring new receivables pools;
- Performing a formal credit evaluation for each new seller and the related receivables;
- Maintaining ongoing surveillance of asset quality and liquidity facilities;
- Maintaining and administering the issuance and maturity of ABCP; and
- Drawing liquidity and credit enhancement facilities as necessary to repay ABCP holders on a timely basis.
Based on the outcome of the reviews and ongoing communications with Citibank, we are satisfied that it is capable of carrying out its responsibilities under the program documents..
Surveillance
The ratings on all support providers in CRC are 'A-1' or higher. Each partially supported pool financed by CRC is reviewed to a credit quality level consistent with the 'A-1' rating. We monitor the ratings of all support providers and asset performance metrics on an ongoing basis.
Portfolio data
The conduit administrator has provided capacity utilization and collateral concentration data for the portfolio as a part of S&P Global Ratings' ABCP conduit surveillance process that is presented below in a standardized format.
Chart 2
Chart 3
Related Criteria
- Global Asset-Backed Commercial Paper Methodology And Assumptions, March 22, 2024
- Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019
- Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- Principles Of Credit Ratings, Feb. 16, 2011
Related Research
- The Role Of Management Reviews And Surveillance In Rating ABCP Issued By Conduits, March 22, 2024
- Global Structured Finance Scenario and Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Standard & Poor's Clarifies Its Approach To Requests For Rating Agency Confirmation On Structured Finance Transactions, May 18, 2012
This report does not constitute a rating action.
Primary Credit Analyst: | Brandon C Wylde, New York + 1 (212) 438 2581; brandon.wylde@spglobal.com |
Secondary Contact: | Dev C Vithani, New York + 1 (212) 438 1714; dev.vithani@spglobal.com |
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