Rationale

The short-term 'A-1 (sf)' ratings on Mountcliff Funding LLC's (Mountcliff's) U.S. dollar-denominated series A standard, callable, puttable, and puttable/callable asset-backed commercial paper (ABCP) notes reflect the following:

• The program's legal structure, including Mountcliff's intended bankruptcy-remote status;
• The full credit and liquidity support provided by support agreements in the form of asset purchase agreements, loan agreements, guaranty, total return swaps, and any other form of agreements with counterparties rated at least 'A-1' or by qualified investments without support agreements rated at least 'A-1' or as high as the ABCP notes;
• The amounts received from the support agreements or qualified investments being sufficient to pay the outstanding series A standard, callable, puttable, and puttable/callable ABCP notes on their respective payment dates;
• ABCP note issuance tests that restrict the amounts to no greater than amounts that can be fully supported by support agreements or qualified investments; and
• 20 Gates Management LLC's (20 Gates) ability to carry out its duties as program administrative agent.

Environmental, Social, And Governance (ESG) Factors

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 on the ESG considerations relevant for bank ratings, refer to the U.S. and Canadian, EMEA, Asia-Pacific, and Latin American bank ESG industry report cards: ESG report cards.)

Program Structure

The chart below shows an overview of the program's structure.

Key Features

Mountcliff is a bankruptcy-remote, special-purpose entity, and limited liability company incorporated under Delaware law to issue U.S. dollar-denominated series A standard (non-redeemable), callable, puttable, and puttable/callable ABCP notes. The ABCP notes can bear interest at a fixed or floating rate, except for ABCP notes issued to fund qualified investments, which only bear interest at a fixed rate. Standard ABCP notes also can be issued at a discount. All of the ABCP notes will have a maturities of up to 397 days.

Mountcliff will use the ABCP note proceeds to fund assets under support agreements or qualified investments in accordance with the investment policy.

Qualified investments are securities rated at-least 'A-1' by S&P Global Ratings and not backed by support agreements. Qualified investments also must meet the following conditions:

• Denominated in U.S. dollars;
• At the time of acquisition, not be past due;
• At the time of acquisition, mature no later than 93 days and, in the case of qualified bonds (senior unsecured fixed rate debt securities rated at least 'A-1' or 'A'), mature no later than 269 days after the date of acquisition provided the maturity date is either on or a day prior to the ABCP's maturity;
• Issued at a discount or bears interest at a fixed rate, and the interest payment dates must match or be preceded by not more than one business day of the ABCP notes issued by Mountcliff to fund such acquisition;
• Acquired only if Mountcliff has deposited any negative carry amount, if applicable, relating to prior qualified investments into the negative carry account; and
• Outstanding amount cannot exceed 15% of all outstanding ABCP notes.

In addition to the above conditions, short-term interest-bearing obligations such as banker's acceptances, time deposits, certificate of deposits, and commercial paper may be rated as high as the ABCP notes.

Callable notes

The callable notes will give Mountcliff the right to redeem, in whole or in part, the related callable note on its call date (a specified date before the stated maturity date). The call provisions for each callable note--including call dates, call notice requirements, and the applicable interest rate--are to be set forth in a depositary agreement. The terms of the depositary agreement require that upon Mountcliff's election to call a note and its delivery of the notice according to the call notice provisions, Mountcliff is obligated to pay principal and any interest or discount, as applicable, that's accrued up until, but excluding, the call date.

If Mountcliff does not elect to exercise its call option, the note is required to be paid on its stated maturity date in an amount equal to principal and interest, accrued and unpaid, or accrued up until the stated maturity date.

Puttable notes

The puttable notes will give the noteholder the right to be repaid, in whole or in part, on its put date (a specified date before the stated maturity date). The put provisions for each puttable note--including put dates, put notice requirements, and the applicable interest rate--will be set forth in a depositary agreement.

Upon the noteholder's election to put a note and its delivery of notice according to the put notice provisions, Mountcliff is obligated to pay principal and interest or discount (as applicable), accrued and unpaid, or accreted up to, but excluding, the put date.

If the noteholder does not elect to exercise its put option, the note is required to be paid on its stated maturity date in an amount equal to principal and any interest, that's accrued and unpaid, or accreted up to the stated maturity date.

Puttable/callable notes

The puttable/callable notes will give the noteholder and Mountcliff the same rights as described above for the puttable and callable notes. The notes can be called or put in whole or in part. The depositary agreement will dictate the precedence of the put or call option. If no early redemption option is exercised, then the notes will be paid on the stated maturity.

Program Overview

Counterparty/Credit Quality

Liquidity support

The support agreements with counterparties rated at least 'A-1' that provide liquidity support to the ABCP notes issued by the program and/or qualified investments rated at least 'A-1' or as high as the ABCP notes.

Credit support

The ABCP notes are fully supported by the proceeds received under the support agreements and/or from the qualified investments.

Interest rate protection

The interest received under the coverage provided by the support agreements or from the cash flows on the qualified investments sufficient to cover the interest on the ABCP notes.

Foreign exchange hedging

The proceeds from the support agreements and/or qualified investments are all in U.S. dollars; therefore, foreign exchange hedging is not applicable.

To the extent non-U.S. dollar assets are funded under support agreements, any foreign currency risk must be fully hedged. In addition, the program documents provide that any hedge agreement counterparties must be rated at least 'A-1'. Before entering into a hedge agreement, Mountcliff is required to receive written confirmation from S&P Global Ratings that the financing would not result in a reduction or a withdrawal of the ratings on the ABCP notes.

Liquidity outs

The support providers are not obligated to fund beyond its support commitment or if there is any insolvency event with respect to Mountcliff.

Legal

Substantive consolidation

Mountcliff is a limited liability company incorporated under Delaware law, and its sole member is Explorers Gate LLC, a Delaware LLC. There is no ongoing economic, financial, or operational dependency on the sponsor, 20 Gates, for the performance of the ABCP notes. Mountcliff has been analyzed and are consistent with S&P Global Ratings' bankruptcy remoteness criteria. Non-consolidation opinions were reviewed, addressing the substantive consolidation risk that a bankruptcy of Explorers Gate LLC, as parent, would have on Mountcliff.

Clawback/preference risk

ABCP investors are insulated from the legal risk associated with a seller's or originator's bankruptcy because the liquidity providers fund all preference payment through each support agreement. In addition, preference risk relating to payments made by support agreement counterparties and/or qualified investments are reflected in the rating on the support agreement counterparty or the qualified investments.

Cash Flow And Payment Structure

New series issuance tests

The conditions necessary to designate and issue a new series of ABCP notes include solvency of Mountcliff, among others.

Liability (specific series) issuance tests

The conditions necessary for 20 Gates, as administrator, to issue the ABCP notes of a specific series include, but are not limited to:

• Rating agency confirmation for financing or acquiring asset interest under a new support agreement;
• The aggregate principal amount of the notes outstanding does not exceed $10 billion;
• The aggregate principal amount of all outstanding ABCP notes does not exceed the aggregate investment amounts in underlying asset interests plus permitted investments;
• The face amount of all outstanding ABCP notes does not exceed the aggregate commitment under all support agreements plus permitted investments and other amounts available to Mountcliff;
• Outstanding ABCP notes issued to fund the qualified investment does not exceed fifteen percent of the total outstanding ABCP notes;
• Qualified investments' negative does not carry exceed the qualified investments' reserve;
• The ABCP notes' maturity date is not a business day or occurs later than 397 days following the issue date;
• No series liquidation event shall have occurred;
• An event of bankruptcy shall have occurred with respect to Mountcliff; and
• The ABCP note proceeds applied to fund or maintain an asset interest with respect to which the related counterparty does not have a rating at least as high as the ABCP notes.

Series liquidation events

Mountcliff will not issue ABCP notes if any of the following events occur and Deutsche Bank Trust Co. Americas will cease paying the maturing ABCP notes unless 20 Gates withdraws the event and initiates remedies:

• Non-payment of ABCP notes when due;
• Event of bankruptcy of Mountcliff; and
• Support counterparty default, which can affect the payment of maturing ABCP notes.

Waterfall

The administrator can allocate proceeds in the following order of priority:

• If a series liquidation event has occurred and is continuing, to pay in the following order of priority: (a)all amounts advanced, incurred, or expended by master collateral trustee, the depositary or the backup payment administrator; (b)all amounts advanced, incurred, or expended by the administrator;
• Principal and interest on any discretionary advances made to Mountcliff;
• Matured notes and to pay interest when due on interest bearing notes;
• Any fees due and payable to administrator and dealers;
• Any amounts due and owing to each support provider, hedge contract counterparties, management company, etc.;
• Mountcliff's other indebtedness and expenses; and
• To fund the negative carry account related to qualified investments.

Operational Risk

Review status

Any new financing agreement other than the liquidity agreement by Societe Generale, Natixis New York Branch, and BNP Paribas New York Branch that Mountcliff will enter into will be reviewed by S&P Global Ratings prior to execution.

Administrator review

The program administrator's experience and past performance are factors in the ratings process. S&P Global Ratings conducts administrator business reviews in consultation with 20 Gates to evaluate Global Securitization's and 20 Gates' ability to carry out responsibilities under the program documents, such as:

• Facilitating assets, qualified investments, and other permitted investments;
• Providing assistance to Mountcliff's issuance, sale, payment, and cancellation of the ABCP notes;
• Overseeing the administration of the ABCP notes' designated series; and
• Drawing on support agreements on Mountcliff's behalf as necessary to repay ABCP holders on a timely basis.

Based on the outcome of the reviews and ongoing communications with 20 Gates, we are satisfied that 20 Gates is capable of carrying out its responsibilities under the program documents.

Surveillance

Since the ABCP notes are intended to be fully supported based on the proceeds received under the support agreements by counterparties rated at least 'A-1' or qualified investments rated at least 'A-1' or as high as ABCP notes, we will link the 'A-1 (sf)' short-term ratings on the ABCP notes to the ratings on the support agreement counterparties rated at least 'A-1' or qualified investments rated at least 'A-1' or as high as the ABCP notes. Therefore, changes to our ratings on any liquidity counterparty, among other things, can result in changes to our rating on the ABCP notes. S&P Global Ratings monitors the ratings on all 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

• General Criteria: Environmental, Social, And Governance Principles In Credit Ratings , Oct. 10, 2021
• Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities , Dec. 22, 2020
• Criteria | Structured Finance | Legal: 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
• Criteria | Structured Finance | General: Global Derivative Agreement Criteria , June 24, 2013
• Criteria | Structured Finance | ABCP: Global Methodology And Assumptions For Calculating Programwide Credit Enhancement In Multiseller ABCP Conduits , Feb. 14, 2013
• 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
• Credit Rating Model: Global ABCP Programwide Credit Enhancement Model, April 2, 2014
• Standard & Poor's Requests Transaction Performance Metrics From Sponsors Or Administrators Of Global ABCP Conduits, Jan. 12, 2012
• Standard & Poor's Clarifies Its Approach To Requests For Rating Agency Confirmation On Structured Finance Transactions, May 18, 2012