| Current rating | ||||
|---|---|---|---|---|
| ABCP notes(i) | Rating | |||
| Callable | A-1+ (sf) | |||
| (i)The ABCP notes listed above are issued at a discount or bear interest at a fixed or floating rate. The ABCP is denominated in U.S. dollars. ABCP--Asset-backed commercial paper. | ||||
Rationale
The short-term 'A-1+ (sf)' rating on Welsh Road Funding LLC's (Welsh Road) U.S. dollar-denominated callable ABCP notes (notes) reflects the following:
- The program's legal structure, including Welsh Road's intended bankruptcy-remote status;
- The full credit and liquidity support provided by program-level support agreements;
- Support providers rated 'A-1+'; and
- The experience and ability of Berkadia Commercial Mortgage LLC (BCM), as program administrator, to carry out day-to-day operational services to Welsh Road, administer the issuance and maturity of the notes, and draw on liquidity and credit facilities to repay the notes on a timely basis.
Environmental, Social, And Governance (ESG)
The credit quality of the underlying assets is not material to our rating analysis, and so there generally are no material ESG credit factors at the asset level. Support providers in ABCP conduits are typically highly rated financial institutions, and our assessment of their creditworthiness incorporates any material ESG credit factors. In our view, exposure to ESG factors in this transaction is limited to the factors related to the support provider. For further information, see our U.S. and Canadian, EMEA, Asia-Pacific, and Latin American bank ESG industry report cards (https://www.spglobal.com/ratings/en/products-benefits/products/esg-in-credit-ratings#sector-report-cards).
Program Structure
The chart below shows an overview of the program's structure.
Chart 1
Key Features
Welsh Road is a bankruptcy-remote, special-purpose, Delaware limited liability company. Its sole member is GSS Holdings (Welsh Road) Inc., in accordance with Welsh Road's formation documents. BCM serves as the program administrator.
Welsh Road was established to issue notes that can be issued at a discount or bear interest at a fixed or floating rate, all with a maturity of up to 364 days. The notes will give Welsh Road the right to redeem, in whole, the related note on its call date.
The proceeds from the notes finance a variable-funding note (VFN) issued by Berkadia Proprietary Holding LLC (BPH) to Welsh Road. BPH invests the proceeds into the operations of Berkadia and its affiliates. Our analysis assumes that Welsh Road will make timely requests for repayment under the VFN with respect to called or matured notes. A surety bond issued by Columbia Insurance Co. (CIC) supports VFN's repayment. Because CIC does not have a short-term rating, Berkshire Hathaway Inc. (BHI) guarantees CIC's obligation to meet timely repayment under the VFN. As a result, the rating on the notes is based on the short-term rating on BHI (AA/Stable/A-1+).
Upon exercising the call, Welsh Road will be obligated to pay the principal and interest or discount on the note, as applicable, accrued up to the call date only. If Welsh Road does not elect to exercise its call option, the transaction documents require Welsh Road to repay the note on its scheduled maturity date in an amount equal to the principal and interest or discount, as applicable, accrued up to the scheduled maturity date.
If a note investor requests to rollover a portion or all of the maturing note in a pre-notice and subsequently fails to purchase a replacement note, Welsh Road can request a draw under a program-level liquidity agreement with BHI to repay the maturing note. The terms of the liquidity agreement require BHI to provide liquidity funds the same day that it receives a notice from Welsh Road.
Program Overview
| Program details | |
|---|---|
| Program name | Welsh Road Funding LLC |
| Program type | Single-seller |
| Administrator | Berkadia Commercial Mortgage LLC |
| Maximum program limit | $1,500,000,000 |
| Reported program-wide credit enhancement | Not applicable--fully supported |
| Support type | Full |
| Review type | Program-level |
| Preference risk | Addressed through the surety bond and guarantee |
| Bankruptcy-remoteness | Opinions, as applicable, were reviewed as part of Welsh Road's bankruptcy-remoteness status under Delaware law |
| Rating dependent participants | |
| Liquidity provider | Berkshire Hathaway Inc. |
| Guarantor provider | Berkshire Hathaway Inc. |
| Support provider | Berkshire Hathaway Inc. |
| Non-rating dependent participants | |
| Administrative agent | Berkadia Commercial Mortgage LLC |
| Depositary/issuing and paying agent | The Bank of New York Mellon |
| Collateral agent | The Bank of New York Mellon |
| Indenture trustee | The Bank of New York Mellon |
| Surety provider | Columbia Insurance Co. |
Counterparty/Credit Quality
Credit and liquidity support
BHI, as guarantee provider, and CIC, as surety provider, fully supports the VFN. The VFN and notes are match-funded. The VFNs will pay principal and interest on the notes.
Interest rate protection
Interest rate risks are addressed through the support provider, BHI, which has a short-term rating at least as high as the note rating, in accordance with our counterparty criteria.
Foreign exchange hedging
The administrative agent intends for all amounts (VFN, support provider proceeds, notes, etc.) to be in U.S. dollars.
Liquidity outs and limitations
The liquidity provider is not obligated to fund the conduit beyond its liquidity commitment or if Welsh Road is insolvent.
Legal
Welsh Road is a limited liability company organized in Delaware. GSS Holdings (Welsh Road) Inc. is the sole member of Welsh Road. Welsh Road has been analyzed as consistent with S&P Global Ratings' bankruptcy-remoteness criteria.
Clawback/preference risk
ABCP investors are insulated from legal risks associated with a seller or originator bankruptcy. This is accomplished through a surety bond and guarantee.
Cash Flow And Payment Structure
Liability issuance tests
The conditions necessary for Welsh Road to issue notes include, but are not limited to, the following:
- The aggregate principal amount of the notes outstanding plus fees and expenses must not exceed the outstanding principal and interest on the VFN plus principal repayments on the VFN held by Welsh Road plus funds on deposit in the expenses account;
- The face amount of all the notes does not exceed the CP issuance cap (a $1.5B program limit, less accrued and unpaid interest on the notes, the net maximum potential unaccrued interest amount, and the expense reserve; the net maximum potential unaccrued interest amount includes the note rate of interest for the first interest period immediately following the issuance of the notes plus a cap of 50 basis points);
- The liquidity agreement is in full force and effect;
- The notes are rated at least 'A-1 (sf)' by S&P Global Ratings;
- No event of default shall have occurred and be continuing;
- All of Welsh Road's representations and warranties in the program documents are true and correct;
- The notes are not required to be registered under the Securities Act; and
- The notes have a maturity that is no more than 364 days following the settlement date.
Post-default waterfall
The administrative agent disburses proceeds in the following order of priority pertaining to the notes:
- The repayment of amounts, on a pro rata basis, advanced, incurred, or expended by the collateral agent, depositary, indenture trustee, and paying agent;
- Pay, on a pro rata basis, all indebtedness due and owed by Welsh Road to the holders of the outstanding notes and to the liquidity provider in connection with the liquidity loan agreement;
- Pay, on a pro rata basis, all costs and expenses related to indenture trustee, collateral agent and depositary indemnities (not to exceed the maximum indemnity amount) plus tax gross-up and extraordinary expenses; and
- Pay all remaining amounts, if any, to the holders of the notes.
Operational Risk
Review status
Welsh Road's notes are fully supported by program-level support agreements (conduit-level fully supported notes). Any amendments to the program documents will be reviewed prior to closing by S&P Global Ratings.
Administrator review
The program administrator's experience and past performance are factors in the ratings process. S&P Global Ratings conducts administrator business reviews to evaluate BCM's ability to carry out responsibilities under the program documents, such as:
- Maintaining ongoing surveillance of support provider facilities;
- Maintaining and administering the issuance and the call or maturing of the notes; and
- Making timely requests for repayment under the VFN or drawing on support facilities, as necessary, to repay noteholders on a timely basis.
Based on the outcome of the reviews and ongoing communications with BCM, we are satisfied that the entity is capable of carrying out the responsibilities under the program documents.
Surveillance
The short-term rating on the support provider for Welsh Road is 'A-1+'. S&P Global Ratings monitors the ratings on support providers on an ongoing basis.
Portfolio data
The conduit administrator has provided capacity utilization 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
Related Criteria
- Criteria | Structured Finance | General: 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
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | ABCP: Global Methodology For Analyzing Liquidity Funding Outs And Limitations In ABCP Transactions, Oct. 27, 2014
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- Criteria | Structured Finance | ABCP: Asset-Backed Commercial Paper Issued By Multiseller Conduits: Classification And Timing Of Reviews For New-Seller Transactions, April 18, 2011
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | ABCP: S&P Global Ratings' Analysis Of ABCP Ratings Following Changes To Ratings On Support Providers, Dec. 18, 2008
- Criteria | Structured Finance | ABCP: Global Asset-Backed Commercial Paper Criteria, Sept. 29, 2005
Related Research
- 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
- Assessing Credit Quality By The Weakest Link, Feb. 13, 2012
- Standard & Poor's Requests Transaction Performance Metrics From Sponsors Or Administrators Of Global ABCP Conduits, Jan. 12, 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 |
| Research Contributor: | Manash Mazumdar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.