Ratings Detail
| Current ratings | ||||
|---|---|---|---|---|
| Type(i) | Rating | |||
| Series A | ||||
| Standard ABCP notes(i) | A-1 (sf) | |||
| Callable ABCP notes(i) | A-1 (sf) | |||
| Puttable ABCP notes(i) | A-1 (sf) | |||
| Puttable/callable ABCP notes(i) | A-1 (sf) | |||
| (i)The ABCP notes listed above can be issued at a discount or interest-bearing basis at either a fixed or floating rate. For floating-rate ABCP, fallback provisions are applicable referencing alternate base rates, such as SOFR, the Federal Funds Rate, or any other base rate with varying reset periods as specified in the transaction supplements. The ABCP is denominated in U.S. dollars. ABCP--Asset-backed commercial paper. | ||||
S&P Global Ratings' 'A-1 (sf)' short-term ratings on Washington Morgan Capital Co. LLC's (Washington Morgan) U.S. dollar-denominated series A standard, callable, puttable, and puttable/callable asset-backed commercial paper (ABCP) notes are primarily based upon:
- The program's legal structure, including Washington Morgan's intended bankruptcy-remote status;
- The full credit and liquidity support to be provided by liquidity agreements in the form of asset purchase agreements, loan agreements, global or master securities lending agreements, global or master repurchase agreements, and hedge agreements in the form of total return swaps with counterparties rated at least 'A-1';
- The support providers rated 'A-1' or higher that will provide liquidity or indemnification support for any hedging shortfalls and any risks associated with floating reference rates;
- The amounts received from the liquidity agreements 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 liquidity agreements; and
- Guggenheim Treasury Services LLC's experience and ability to carry out their duties as program manager.
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, see our 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 structure.
Chart 1
Key features
Washington Morgan is a bankruptcy-remote, multi-use special-purpose entity (SPE) and limited liability company incorporated under Delaware law to issue U.S. dollar-denominated series A standard, callable, puttable, and puttable/callable ABCP notes. The ABCP notes can be issued at a discount or bear interest at a fixed or floating rate, with maturities of up to 397 days.
Washington Morgan, or an intermediate SPE, may also enter into liquidity agreements in the form of asset purchase agreements, loan agreements, global or master securities lending agreements, global or master repurchase agreements, and hedge agreements (in the form of total return swaps, etc.) with counterparties rated as high as the ABCP issued. The ABCP note proceeds will be used to fund a variety of assets, including asset-backed pools, securities, trade receivables, and other financial assets, which limit the risk of liabilities stemming from operating assets.
For the callable ABCP notes, Washington Morgan has the option to pay the ABCP notes in whole prior to their maturity date.
For the puttable ABCP notes, the holder has the option to require Washington Morgan to pay the ABCP notes in whole or in part prior to their maturity date.
For the puttable/callable ABCP notes, Washington Morgan has the option to pay, and the holder has the option to require Washington Morgan to pay, the ABCP notes prior to their maturity date. The pricing supplements will specify the option priority if both the call and the put options are exercised. Principal and interest or discount, as applicable, will accrue up to the call or put date only.
Program Overview
| Program details | |
|---|---|
| Program name | Washington Morgan Capital Co. LLC. |
| Conduit type | Multiseller. |
| Sponsor | Guggenheim Treasury Services LLC. |
| Manager | Guggenheim Treasury Services LLC. |
| Maximum program limit (bil. $) | Not applicable. |
| Reported programwide credit enhancement | Not applicable--fully supported. |
| Support type | Full. |
| Review type/status | Prior review |
| Preference risk | Covered by liquidity agreement. |
| Bankruptcy-remoteness | Opinions, as applicable, were reviewed as part of Washington Morgan's bankruptcy-remoteness status under Delaware law. |
| Rating-dependent participants | |
| Liquidity provider | Counterparties rated 'A-1' or higher. |
| Hedge provider | Counterparties rated 'A-1' or higher. |
| Support provider | Counterparties rated 'A-1' or higher. |
| Bank account provider | The Bank of New York Mellon. |
| Nonrating-dependent participants | |
| Sponsor/manager | Guggenheim Treasury Services LLC. |
| Issuing and paying agent | The Bank of New York Mellon. |
| Depositary | The Bank of New York Mellon. |
Counterparty/Credit Quality
Liquidity support
The liquidity agreements with counterparties rated at least 'A-1' provide liquidity support to the ABCP notes issued by the program. The liquidity will fund the face amount of the ABCP notes, including any hedging shortfalls, risks associated with floating reference rates, and breakage costs.
Credit support
The ABCP notes are fully supported by the proceeds received under the liquidity agreements.
Interest rate protection
Washington Morgan has the ability to issue floating-rate ABCP notes. The liquidity providers will cover any increase in the floating rate due on the ABCP notes.
Foreign exchange hedging
The liquidity providers implement a hedging strategy for any mismatch between the assets and the ABCP notes currency on Washington Morgan's behalf. They will also fully cover any foreign exchange shortfall risks, including any breakage costs. The assets and liquidity are generally expected to be in the same currency.
Liquidity outs
The liquidity providers are not obligated to fund if there is a bankruptcy event with respect to Washington Morgan.
Legal
Substantive consolidation
Washington Morgan is a limited liability company (LLC) organized in Delaware according to its formation documents. Guggenheim Treasury Services LLC, a Delaware organized company, is the program manager. Washington Morgan, under the LLC agreement, is 100% owned by Liberty Hampshire Co. LLC, while GSS Holdings II Inc. owns 0% interest. Nonconsolidation opinions were reviewed to address the substantive consolidation risk that the bankruptcy of Liberty Hampshire, as parent, would have on Washington Morgan.
Clawback/preference risk
ABCP note investors are insulated from the legal risks associated with a seller or originator bankruptcy because the liquidity providers will fund all preference payments through each liquidity agreement.
Cash Flow And Payment Structure
Liability issuance tests
ABCP issuances are restricted unless the following conditions have been satisfied:
- Washington Morgan has liquidity commitments that are sufficient to fund the face amount of the ABCP notes prior to or at maturity, any hedging obligations (including breakage), and any interest payments when due; and
- The nonexistence of any "no issuance events" (as discussed below).
No issuance events
Washington Morgan will instruct The Bank of New York Mellon (BNYM) to cease ABCP note issuance if any of the following events occurs:
- Washington Morgan and Guggenheim breach any representations and warranties under the management agreement;
- The issuing and paying agency agreement is no longer in effect;
- Washington Morgan violates any liquidity management provisions or covenants, which include having sufficient liquidity to cover the face amount of ABCP notes, interest, and hedging obligations (including breakage); drawing down on liquidity one day prior to liquidity expiration; ensuring any advances to the sellers do not exceed the available liquidity amount; and ensuring, for any non-U.S. dollar-denominated liquidity, that there is a hedge with a counterparty rated at least 'A-1' to cover the face amount of ABCP notes, interest, and hedging obligations (including breakage);
- The termination of the manager (Guggenheim), unless a successor manager has agreed to perform the management obligations;
- The resignation of BNYM as the issuing and paying agent without a successor; and
- Washington Morgan files for bankruptcy.
Payment priority
If Washington Morgan has sufficient funds to pay all principal and interest on the ABCP notes and hedging obligations, it will pay all amounts due and payable. Otherwise, the funds will be distributed in the following order of priority:
- Pay principal and interest on the ABCP notes and hedging obligations on a pro rata basis;
- Pay all reasonable costs and expenses of the manager and issuing and paying agent;
- Pay all remaining fees and expenses; and
- Remit the balance, if any, after the above amounts have been paid in full, to Washington Morgan.
Operational Risk
Review status
Any new financing agreement that Washington Morgan, or an intermediate SPE, will enter into will be reviewed by S&P Global Ratings prior to execution.
Manager review
The program manager's experience and past performance are factors in the ratings process. S&P Global Ratings conducts manager business reviews to evaluate Guggenheim's ability to carry out its responsibilities under the program documents such as:
- Manage Washington Morgan's day-to-day operations in accordance with its management agreement;
- Maintain Washington Morgan's books and records;
- Monitor liquidity commitments, ABCP note maturity, usage, and availability under the liquidity agreements;
- Issue ABCP notes in accordance with the program documents; and
- Calculate insufficiencies, if any, to pay ABCP notes at maturity.
Based on the outcome of the reviews and ongoing communications with Guggenheim, we are satisfied that Guggenheim is capable of carrying out its responsibilities under the program documents.
Surveillance
The ratings on all support providers in Washington Morgan are 'A-1 (sf)' or higher. S&P Global Ratings monitors the ratings on all support providers on an ongoing basis.
Portfolio data
The program manager 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
- 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
- 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: | Dev C Vithani, New York + 1 (212) 438 1714; dev.vithani@spglobal.com |
| Secondary Contact: | Lisa Ardolina, New York + 1 (212) 438 3810; lisa.ardolina@spglobal.com |
| Research Assistant: | Ryan Dorgan, Chicago |
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